Comment
By Mansoor Ahmad
LAHORE: The inflation is low because the base value of every item, commodity and service has increased over a decade, but no matter however low it may be, it still torments those, who can hardly make both ends meet.
The poor wonder as to why they are feeling the squeeze when the inflation is low.
Majority of Pakistanis are living slightly above the poverty line. They earn just enough to manage bare essential needs of their family on their incomes.
When rates of commodities rise even slightly they do not have even meager resources to absorb this increase. So they compromise on even the most basic needs in order to manage their budgets within the available resources.
About a decade back when electricity tariff was Rs5/unit, an increase of Rs2 meant around 40 percent hike in the power utility bill, but in case of an average tariff of Rs12/unit, the same hike would be a little less than two percent. An increase of Rs2/unit in electricity rates might not be a problem for those having consumable monthly surplus. But for those living on edge this uptick is can prove to be the straw that breaks the camel’s back. The dilemma for the poor is that they have never been able to increase their income in line with inflation. In the double-digit inflation days they were hardly able to push their income up 5 percent. The story was no different when it was hovering in the range of 3-4 percent.
After decades of earning below the national income level this group is losing its buying power with every passing year.
Most have survived because in course of time their second or third generation has chipped in as a helping hand. This period lasts for a while as the younger generation after being in work for a year or two starts its own families and the rest is history.
The better off segments of the society manage to tolerate inflation due either to corresponding increase in their incomes or by passing on both direct and indirect taxes to the poor. The importers for instance pass on the custom duty, sales tax, import charges and the advance income tax they pay at the import stage to the consumers. The passing of advance income tax as a cost is unfair but since the tax they pay at the import stage is their full and final settlement of income tax liability they do not have to show sales documents to the Federal Board of Revenue (FBR).
They simply include the income tax they paid (which was their liability) as a cost and sell the item/service at a higher price. In our society the industrialists, traders pass on the impact of inflation to the consumers. The government employees now yearly get increments that are higher or adjusted to the inflation in the preceding year. The big corporate sectors also adjust the pay-raise to the inflation.
The low-paid industrial worker does not get an increase because of higher supply of workforce than demand. The daily-wagers and the farm labourers also remain deprived of fair raise in income. These segments of society are over 65 percent of country’s population.
They do not have the capability to tolerate even three to five percent inflation. The planners should devise policies that should ensure that low or high inflation do not further deteriorates the quality of their lives.