The complete picture
Inflation is a hot button subject, not just these days but it has always been thus. Prices will rise and what have you. Though the prices of yore are wistfully recalled by the older lot, they conveniently omit the fact that cribbing about inflation was a bit of a national pastime even back then.
Inflation as a serious problem in recent times came about in the Musharraf era. Back when he took over, the economy was in a stagflationary state – low growth, low inflation. His financial mandarins decided to spice things up on the growth front by engaging in public spending and loosening the monetary policy. There was growth, yes, but it was accompanied by inflation, exactly as economic science says there will be. Soon, the inflation started outpacing the bit of growth we had seen. Sooner still, the central bank opted to eject out of the whole situation and tighten the monetary policy, regardless of what the Shaukat Aziz dispensation continued to do at the finance ministry in Islamabad.
That state of affairs continued into the present government’s tenure. The effects of a particular economic policy are hard to wear out. Excess liquidity in the money markets is tougher to siphon out than inject it in calmer money markets. The international, unactionable pressures like the rising international prices of food and fuel. This is not to imply that the government is not to be blamed at all. By not subscribing strictly to fiscal discipline, the government has been borrowing endlessly from the central bank, fuelling inflation to no end.
But it hasn’t all been a sob story. As was mentioned before, growth cannot be brought about by inflation – though the reverse isn’t true. A large feed into rise in inflation has been that of inflation in food items. That is because the government stuck to its guns and courted the criticism of the media by allowing farmers access to foreign markets. The result: though food items became expensive for the urban middle-classes and the salaried lot (to which most journalists belong) there was a measure of prosperity in the rural areas. According to a recent report, there has been a whopping five percent decrease in a particular level of poverty. Millions of former subsistence level families now have a rudimentary but burgeoning disposable income. The question is whether the middle-classes are ready to put the working classes interests ahead of them.