•Fahad Iqbal

The persistent rise in the prices of goods and services in an economy in a specific period of time.

When the general price level rises, each unit of the functional currency buys fewer goods and services. Decline in the real value of money.

Once prices have increased, they rarely go back, even if the taxes are later reduced

An inflationary indicator that measures the change in

the cost of a fixed basket of products and services

Including housing, electricity, food, and transportation. it

is also called cost-of-living index.

Designed for those items which are mostly consumable in

daily life on the primary and secondary level these prices are

collected from whole sale markets as well as from mills at

organized wholesale market level

It covers the whole sale price of 106 commodities

prevailing in 18 major cities of Pakistan

The weekly change of price of 53 selected

items of daily use consumed by those house

holds whose monthly income in the base year

2000-01 ranged from Rs 3000 to above Rs12000

per month

Informs about the actual position of supply

whether the commodity is available in market or

not

Main reason of inflation is expectation.

Demand for non-development expenditures:

Decelerating Economic growth

Construction of houses

Increase in wages

Loose monetary policies

Depreciating Pak Rupee

Frequent adjustments in the administered prices

of Gas, electricity, POL (Petroleum, Oil and

Lubricants) products

Political instability

Population explosion

Black money

Consumption habits

Sick industrial unit

Period SPI CPI WPI

2001-02 3.37% 3.54% 2.08%

2002-03 3.58% 3.10% 5.57%

2003-04 6.83% 4.57% 7.91%

2004-05 11.55% 9.28% 6.75%

2005-06 7.02% 7.92% 10.10%

2006-07 10.82% 7.77% 6.94%

2007- 08 11.03% 8.01% 10.26%

Setting of interest rates

Through Open market operations

Through the setting of banking reserve requirements

Monetary policy has to be forward looking

Taxation

Government expenditure

Encourage imports by lowering duties

Banning the export of essential items (pulses,

cereals, and oils to support the domestic

consumption)