KARACHI, May 9: The private consumption witnessed massive growth of 130 per cent in the last five years though the GDP growth rate dipped hinting at expanding parallel economy in Pakistan.

The latest Statistical Bulletin issued by the State Bank for May, reveals that private spending on consumption saw a sharp rise each year since 2007-08 but the economy remained depressed all these years.

Economists believe that higher consumption leads to higher economic growth and that China, India and Indonesia have adopted consumerism and established this principle.

However, the consumer-led US economy where consumption is 72 per cent of GDP has yet to come out of the recession for the six years.

The General Musharraf government promoted consumerism and a boom in mobile phone and services industry pushed the GDP growth rate above 6 per cent.

The private consumption in the last five years boomed by 130 per cent to Rs18.031 trillion in 2012 from Rs7.835tr in 2007-08. Despite this massive increase in consumption the GDP growth rate could not exceed 4 per cent indicating the disconnection between the consumption and production in the formal sector.

The State Bank’s report showed that last year the consumption expenditure was 87 per cent of GDP at market prices. Five years back it was 76 per cent of GDP.

Some economists believe that consumerism could not bring depth in the economy which may collapse in case of shock like financial crisis that hit the US economy in 2007 and spread to Europe later. Both continents have so far not been able to come out of the woods.

But the consumer-led economies like India and China succeeded to show strength despite some dark patches in the growth pattern.

Though the country could not be able to attract foreign investment like China and India, branded products of very high cost however have found market showing the money floating in the economy and consumers are there for spending on brands.

The higher consumer spending also impacts per capita income that went up sharply during the five years from Rs58,510 to Rs108,217.

The real impact was visible in the services sector which showed an increase of 105 per cent during the five years from Rs4.917 trillion to Rs10.122tr.

Analysts were of the view that higher consumption without economic growth (low growth) only reflects the large presence of black money which is being cleaned in property and share market.