KARACHI, Jan 29: Rising transport cost, increasing house rent and mounting pressure of children’s education fees in last 10 years has forced an average income Pakistani household to cut down on food consumption and even ignore health care.
An official survey has found that the share of food cost in an average family budget has gone down by 5.22 per cent. Health care cost share, too, is on the decline. The food cost ratio in any family budget comes down for two reasons. Either the income of the family has increased substantially, leading to diversification in expenditures, which brings down food spending ratio in the overall budget despite a substantial increase in food bill. Or, the food cost is being saved within a limited income to meet the expenditures of more pressing contingencies.
In Pakistan, where more than 50,000 employees in banks, government offices and private concerns have been laid off, inflation has touched double digit figures during a last few years. Economic growth has been virtually stagnant, even negative, in certain areas, during the last decade, per capita income has obviously come down, raising the poverty level to an alarming level.
Therefore, in the last decade, poverty not only extended its tentacles far and wide in the country by bringing into its fold greater chunk of population (more than 40 per cent), but has hit most hard and literally sapped out all the vitality of the middle-income groups. Thanks to the firmness and consistency of the IMF-World Bank-guided policies of open market economy, privatisation and deregulation during all the nine governments (four elected and five unelected) since 1990, the so-called middle income groups have now been reduced to paupers.
The Federal Bureau of Statistics completed a Family Budget Survey in 2001 to determine consumption pattern and work out an average percentage expenditure of a household of each item and group of commodities. The average percentage expenditures on item and commodity groups are called weights and are being used in drawing up Consumer Price Index (CPI). The CPI is the main measure of price changes at the retail level and is accepted as the measure of inflation in the country.
Covering 41,000 households in 52 urban and semi-urban centres in all parts of the country, the information and data collected in the survey have forced the home economists, market analysts and independent experts to have a hard look at the weightages given to different groups of commodities in drawing up a new CPI with 2000-2001 as the new base year.
The recent Family Budget Survey has found that weightage of food, tobacco and beverages have come down from 49.35 percentage points to 44.13 percentage points in the new CPI, to be introduced on trial basis in the next few weeks. It is expected to be made official CPI by next July, with 2000-2001 as the base year.
A drop of 5.22 percentage points in food expenditure budget of an average household in big cities like Karachi, Lahore, Rawalpindi, Peshawar and Quetta and small towns like Chakwal and Minawali in Punjab, Tando Mohammad Khan in Sindh, Khuzdar in Balochistan and Mardan in the NWFP means an average household has been forced to cut down on consumption of basic essentials like flour, rice, beef and vegetables. Poultry, fish, milk, eggs, butter, cooking oil and ghee are the luxuries that many households in Pakistan can hardly afford. A good amount of money is being set aside to pay for rising house rent and to meet increasing transportation cost in the cities.
House rent now constitutes 21.69 per cent of the average family budget, showing a significant increase of 2.71 per cent from 18.98 per cent. In cities like Karachi, a small two-room house in slum areas like Lyari and Baldia town, cost anywhere up to Rs2,000 to Rs2,500 a month which comes to 25 per cent of the family budget if the income is Rs8,000 a month. Take home salary of a grade-16 government employee is Rs7,000 and that of grade-17 about Rs10,000. Government employees do enjoy benefit of official residence but a private employee will have to pay anywhere from Rs2,500 to Rs3,000 a month house rent.
Transport and communication now constitute 5.56 per cent of the family budget up from 5.08 per cent. The law of averages has been applied on transport cost as the survey covered 52 big and small cities. It will not reveal fully the impact of long-distance transport cost of an earning member of the family and school-or college-going children in cities like Karachi and Lahore where transport cost should be 9 to 10 per cent per.
Education expenditure now claims 2.79 per cent of the family budget from 2 per cent in the CPI with 1990-91 as the base year. Most of the children go in the government-run educational centres in 52 cities covered by the Household Budget Survey. Private institutions in Karachi, Lahore and other big cities, charging exorbitant fees, have been ignored. Officials explained that there is much of a difference in educational institutions’ fees in big cities and have, therefore, relied on government institutions.
In Karachi and Lahore, average private school charge Rs1,000 to Rs2,000 fees and in some cases it goes up to Rs4,000 and Rs5,000 a month. Add to this, the other costs associated with the education of the children.
Laundry claims more money on a family budget than education. Its share has now jumped up to 6.01 per cent of the budget from previously 5.40 per cent.
Rising cost is forcing the urban families to spend less on their dresses and footwears. Its share in the budget has come down to 6.34 per cent from 7.56 per cent, calculated way back in 1990, when poverty started knocking the doors of the middle income households.
Recreation and entertainment are unknown to a large number of the 41,000 households covered under the survey. Ten years ago an average household was spending 1.12 per cent of the budget. It has now come down to 0.69 per cent.
10 CATEGORIES: Overall, there are 10 categories of commodities and services that constitute the main elements of a household budget. These are: food, apparels, house rent, fuel, household furniture and equipment, transport, education, laundry, medicines and health care and recreation.
Cost share of each of these groups vary with the incomes. A low-income group spends most on the food and has little to spend on other things. Food cost does not claim a big share in the budget of a higher income group as that of a low-income group.
The bureau is involved in collecting information and data on vital areas of the national economy. It offers three price indices which are generally looked with scepticism. The three indices are CPI, Sensitive Price Index (SPI) and the Wholesale Price Index (WPI).
Taking note of growing public criticism, the government has involved academics, economists and analysts of the independent research organisations, trade union leaders and faculty members. “We invited a large number of persons but only 20 turned up who now constitute the Committee that has given guidance in survey and is processing the data and information,” said a senior official of the Bureau.
The committee is headed by the Chief Economist of the Planning Commission. It recommended a new list of items and services which were not included in the previous household budget surveys. In the new arrangement, 141 items were excluded and 56 items added.
These include 17 medicines and drugs. Blood pressure drug, diabetics control tablets and cough syrups are now new elements of family budgets. Similarly, the fees of higher educational institutions and reading materials that include periodicals and children magazines are also a part of the family budget. The committee has taken care of changes in tastes and consumption of the middle class families.
The family budget survey has been carried out in 52 cities but CPI will be drawn up on the basis of information from 35 big and small cities of the country that will cover 65 per cent population of the country. It covers 375 items.
The SPI is designed to assess price movement of 51 essential consumer items from 53 markets in 17 cities every week. The WPI is designed to measure the change of price in the primary and wholesale markets. It is based on prices of 99 commodities of all groups collected from 18 cities.
The new CPI with 2000-2001 as the base year is expected to be introduced on trial basis from March along with the CPI with 1990-91 as the base year. All the three indices will be introduced from July.
