Inflation is defined as the
persistent increase in the general prices of the commodities. Anything under the
10% in bearable, but as the inflation rate gets more than 10% it is a matter of
concern for the economists of the country. Pakistan has also been a victim of
inflation during the past decade. People who have not studied economics might be
alien to this term so I would like to expound it in simple terms. If there is a
sudden increase in the price of oil and you have not received an increment in
your salary that means that the increase in the oil price was due to inflation.
There are two main cause of inflation in any economy in the world and the same
are the causes for the inflation in Pakistan. The two major causes are demand
pull and cost-push inflation. Demand pull on inflation is when the demand for
the product is so high that the producer contemplates of increasing the price of
the product in order to earn abnormal profits. Cost-push inflation occurs when
the cost of production increases for most of the products in the county.
Cost-push inflation is normally caused by the action of the government. For
instance there are 2 things which will cause the increase in the cost of
production for everything being produced in the country. The first one is the
fuel price and the second thing is electricity tariff. This is the real reason
prices of the things fluctuate every week and it has made impossible for the
people to manage their personal budget.
Inflation to a certain extent is good for the economy as people earn more money
and they are even paid more money, but the situation worsens when the economy is
hit by hyperinflation. Hyperinflation is term which is used to define inflation
above the rate of 20%. Everyone is adversely hit by hyperinflation. It adds to
uncertainty in the market and people stop investing at all. Employees on fixed
income have to face the problem of a reduction in the real income, as the real
value of money diminishes with inflation. People who have lent money also suffer
as the real value of the money decreases and they lose a lot of money.
There is nothing a local businessman can do in order to control the inflation in
a country. The initiative will have to be taken by the government and after
setting a precedent the government should get people involved in it by holding
different seminars and workshops to control this problem.
Inflation is at its peak all over the world and there are different reasons for
it. In the case of Pakistan, it is the result of monetary phenomenon. The reason
is that excess money supply growth in Pakistan has basically enhanced inflation
in Pakistan.
In Pakistan the main reason of inflation is the increase in the prices of
regular items, such as wheat, sugar, ghee and other items. The government has
totally failed to control the prices of these items. Petrol price hikes is the
second main cause. When oil prices are increased it affects prices of its
complementary goods too. Such as transportation fares, etc. Thirdly, most of the
industries are closed due to government policies creating unemployment.
Pakistan is a developing country. Inflation is one of the major problems of this
country. In fact, it is the root cause of oodles of problems in the country.
This is to draw the attention of authorities towards the urgent need of such
actions that may decrease the inflation rate in our country.