BY SIDRA AIMAN

BSS-V
 CONTENTS
• Definition
• Methods to measure inflation
• Causes of inflation
• Effects of inflation
• Role of inflation in an economy
• Factual data
• Current scenario of inflation in Pakistan
• Government role in controlling inflation
• Recommendations
 DEFINITION

• Rise in the general level of prices of goods

and services in an economy over a period
of time.
 METHODS TO MEASURE
INFLATION
• CONSUMER PRICE INDEX (CPI)
• WHOLE SALE PRICE INDEX (WPI)
• SENSITIVE PRICE INDEX (SPI)
Inflation Current CPI/WPI – Last Calculated CPI/WPI
Rate = 100
Last Calculated CPI/WPI

Inflation 150 – 140

Rate = 140
100 = 7.12%
7.12
 CAUSES OF INFLATION
• Printing excess money.
• Demand-pull inflation.
• Cost-push inflation.
• Wage-push inflation.
• International lending & national debts.
• Decline of exchange rate.
• Federal taxes put on consumer products.
 FEW OTHER FACTORS
• Rapid growth in population.
• Growth in private expenditure.
• Increase in export.
• Money reduction in direct taxes.
 EFFECTS OF INFLATION
• Storage value and purchasing power of
the rupee decreases.
• Consumption declines.
• Production minimizes.
• Poverty increases.
• Less investment.
• Low profits.
• Withdrawal of money from banks.
 ROLE OF INFLATION IN
AN ECONOMY
• Low inflation is a blessing.
• More than 5% is pernicious.
• Zero inflation indicates depression.
PAKISTAN GDP GROWTH
RATE
Yearly Inflation Rates of Pakistan ( 1990-91 = 100)
Inflation Rates based on Sensitive Price Indicator (SPI), Consumer Price Index (CPI) and
Wholesale Price Index (WPI) are
Period SPI CPI WPI
1991-1992 10.54 10.58 9.84
1992-1993 10.71 9.83 7.36
1993-1994 11.79 11.27 11.40
1994-1995 15.01 13.02 16.00
1995-1996 10.71 10.79 11.10
1996-1997 12.45 11.80 13.01
1997-1998 7.35 7.81 6.58
1998-1999 6.44 5.74 6.35
1999-2000 1.83 3.58 1.77
2000-2001 4.84 4.41 6.21
2001-2002 3.37 3.54 2.08
2002-2003 3.58 3.10 5.57
2003-2004 6.83 4.57 7.91
2004-2005 11.55 9.28 6.75
2005-2006 7.02 7.92 10.10
2006-2007 10.82 7.77 6.94

Note: Yearly Inflation rates for the year 1991-02 to 2000-01 are based on 1990-91=100 while
                     inflation rates for the year 2001-02 till to date are based on 2000-01=100
 CURRENT SCENARIO OF
INFLATION IN PAKISTAN
• Pakistan is facing hyper inflation
presently.
• Annual inflation rate in October 2010
stood at 15.3 % .
 GOVERNMENT’s ROLE
• The State Bank of Pakistan (SBP) has
continuously tightened the monetary
policy over the last triennium and more so
in the current fiscal year.
• The government has relaxed its import
regime and allowed imports of essential
commodities.
• The government also increased the scale of
operations of the Utility Stores
Corporation (USC).
 RECOMMENDATIONS
• Reduce our Government Luxury Expenses both
Federal and Provincial.
• Reassess the complete system of Direct and
Indirect Taxes.
• Increase the Production of Food, Industry and
Service things.
• Should charge Capital Gain tax.
• Reduce Unemployment.
• Increase in Agriculture, industry.
• SBP should take major steps to control inflation.
• Pakistan should become self reliant.
QUESTIONS?
COMMENTS?