CPI worries mount as food bites consumers

Its not as if Julys CPI inflation numbers offer a very depressed reading. In fact, its the slowest year-on-year increase since January 2010, and its also spot on with the median forecast of 12.34 percent, based on a Reuters survey of 10 analysts and economists.
But perhaps thats as far good as it can get.
Though, house rent inflation - which has almost a quarter wieghtage in the CPI basket - has continued on its downward journey to 8.78 percent year-on-year, other CPI drivers have been rising.
The price of fuel and lighting last month rose by 21.79 percent year-on-year- its highest since June 2009. And given the risks of further hikes in tariffs, as highlighted in a separate column here, there are fears that the fuel and lighting index will continue to stay uppish in the immediate to medium term.
The fate of CPIs biggest component, food, appears similar. On year-on-year basis, the price hike in both perishable and non-perishable food items was on its multi-month low in July, the month-on-month numbers seem gloomy.
FBS data show that prices of non-perishable food items - which boasts a good 35 percent weight in CPI basket - rose 0.94 percent, whereas that of perishable food items jumped by 5.2 percent, its biggest monthly gain since April 2010.
And to break the proverbial camels back, food looks even costlier in the months to come, in the aftermath of floods that have damaged crops in scattered farming belts across the country. Knowing that wholesale prices have already ticked up 1.67 percent month-on-month, food inflation could become the most troublesome factor for Pakistans economic managers.
The trouble is that neither of the fiscal or monetary policy can guide the economy to safer waters as effectively as good governance. And thats exactly where this government is found wanting.
As the flood recedes, the government must manage its commodity affairs proactively, take immediate stock of the crop situation, ensure smooth commodity distribution by checking hoarders, taking timely import decisions and also perhaps implement an efficient price mechanism.
If the government does that, food inflation will still rise, but it may not get out of hands. Otherwise, even further monetary tightening may not be able to contain the inflationary dragon.