During this season of Eid festivities, Karachiites were seen to have gone on a spending spree. Since the middle class is known to lead the rest of the people in celebrating the joyous day, and since the city is a symbol, representing the greatest concentration of the country’s middle class.
The country wide population of 63 million strong middle-class could be estimated to have spent—from early Ramzan until the wee hours of ‘chand raat’ (the night before eid)—something in the region of Rs126 billion.
For a day, that makes a significant sum of the total country’s consumer spending which amounted to Rs2,793 billion at current prices during 2001-2002.
How do you work out the Rs126 billion figure? That’s simple arithmetic. Of the population of 140 million people, almost 45 per cent is widely believed to fall in the category of those that earn slightly over 2 dollars a day or somewhere in between Rs15000-Rs25000 per family of five per month. A random survey confirmed that on an average, a five-member family within that income bracket spent no less than Rs2000 per member on Eid shopping. Taking that as the base, by simple multiplication over the entire middle-income group population, one arrives at a rounded figure of Rs126 billion.
But Rs2000 per person does’nt really look lavish, if it is seen in the context of what it fetches. A new dress for each family member complete with shoes and accessories, a few household items such as new bed sheets or curtains, a little repair and paint to the house here and there and possibly a few pieces of decoration. Add to that the ‘Eidi’ (money that the children must ‘extort’ from the elders of the family as gift). Muslims also would prepare specially planned elaborate meals, and indulge in delicacies such as sweets and ice-creams, which otherwise would be shunned as extravagance. It is a festival when get-togethers are planned and people take time out and visit relatives. This socialising involves extra commutation cost. Adding all those expenditures together and dividing them by the number of family members, gives the per person cost of Rs 2,000. Many middle income group people—the subject of this study— interviewed by this writer, confirmed the accuracy of this Eid economics.
At the other end retailers—shopkeepers, the wayside hawkers and those that cater to the culinary delights— reported buoyant business this season. Most people confirmed that the city’s main bazaars were thronged with more people, for more of the time this season than in many of the recent previous years. Several officials of traders and shopkeepers associations acknowledged that this year customers showed more willingness to loosen their purse strings, than in most previous similar occasions. In Karachi the restrictive buying hours were relaxed right after the first week of Ramazan. Normally, it had been the custom of shopkeepers, for years, to extend their business time by three to four hours in the last ten days before Eid. But this year it was different. Many popular Eid shopping centres stayed open past midnight to accommodate late night shoppers who thronged those bazaars in groups during day and till later in night. “There were a lot of window shoppers but the number of genuine buyers also greatly exceeded our expectation in the month of Ramazan”, said one happy official of a local market association. He complained that the business all through the year had been slow and even in the two months preceding Ramazan (Rajab and Shaban), when traditionally, retail sales picks up pace as marriages are solemnized in those months, the turnout this year was low, causing nervousness amongst the retailers community. “But by the grace of God higher than expected sales during last 20 days before Eid, more than made up for our past losses”, said this official.
A ready-made children garments merchant said that it was difficult to quantify the difference but there was no denying the fact that business this year was robust when compared to the volume of pre-Eid sales in the preceding two years. Those contacted by this writer in this regard included General Secretary of the Alliance of market associations Atique Mir, officials of the shopkeepers associations of Eidgah Market, Allahwallah Cloth Market, Quereshi Cloth Market, Tariq Road Market, Bhahdurabad Market, Paposhnagar Market, Babar Market (Landhi), Korangi Market and Hyderi Market.
The survey indicated sharp spurt in business of all sorts of fast and slow moving consumer goods, but those that topped the list included kids wear, ladies garments and footwear. Ladies and kids accessories that included toys, handbags, artificial jewellry and bangles were next in line of items that disappeared fast from shopkeepers’ shelfs. Gents ‘shalwar qameez’—which men prefer to wear for ‘eid namaaz’— were also very much in demand during this season. Many garment retailers revealed that to their great joy, they were able to clear not only the fresh stocks but also sell the previously piled up inventories and so release their blocked up cash. “Thank God, after a long time my stores are clear. I have sold even the old stocks of garments and that too at a premium”, a jubilant retailer who runs a rented shop in old city bazaar confided.
Retailers in most bazaars were not willing to quantify the extent of their gains, for obvious reasons. But despite being given to the perennial habit of grumbling, most shopkeepers could hardly hide their joy. The Eid bounty, obviously was not evenly distributed among the retailers community. Amongst other factors such as volume, price and quality of stocks, the location of shops mattered. Those located in upscale or more popular markets, reaped higher profits. Much also depended on the stuff that they were dealing in.
Dr. Ashfaq Hasan Khan, Economic advisor and spokesman of the Ministry of Finance, attributed sharp rise in retail sales of items related to Eid to be reflective of the economic revival in the country. In a statement to the press he implied that the higher turnover of consumer durables, was basically an outcome of the economic policies being pursued by the government over the three years of direct military rule. He contended that the economic stabilization programme had laid the strong foundation for turnaround in the economy.
But for all those happy notes, it is difficult to ignore a nagging worry: There isn’t much to indicate a significant improvement in the earning capacity of people belonging to the middle classes in the country. Agricultural sector performance still depends much on nature and no real breakthrough has been achieved in dealing with hurdles that are believed to be responsible for blocking the country from realization of its full agricultural potential.
Whether it is the skewed pattern of land ownership, non-availability of agricultural credit, inappropriate market infrastructure, lack of guidance to the farming community, problems related to the availability of agricultural inputs specially water, etc., situation if not deteriorated, is much the same as it was when the last government took over. As for manufacturing, the private sector still looks cautious: not willing to make new investment in manufacturing sector despite incentives and ready availability of cheaper credit. In the absence of required level of expansion in those two key economic areas, the capacity of the economy to absorb fresh entrants in the labour market has failed to keep pace with demand. It is also a declared fact that the public spending in employment generating activities has actually been reduced leading to lesser job opportunities in the public sector projects. In fact thousands of people were retrenched over the last few years to supposedly make state sector lean and efficient.
However, if the poverty situation is actually as stark as projected, it would make sense to assume that the consumer spending should have dropped and not increased! How, then, is the middle classes that is sitting on the edge of extreme poverty bracket (under $2 a day earning) are so active in market place? Where from are they getting this extra cash to spend on Eid purchases, if each of their rupee is marked?
Dr Ashfaq maintains that people are spending for they can afford to indulge. In his view poverty situation in the country is not as bad as is orchestrated by the media. He argues that those that we mark as ‘poor’ in Pakistan are far better off than their counterparts in other countries of the region. “Go to Calcutta, Bombay or Bangladesh and you will come to realise the difference”, he said. He admitted that official data is deficient and could hardly be of any help in understanding this phenomenon to one’s satisfaction. “It fails to reflect the complete economic reality”, he maintained.
In his view Pakistani people actually are more well off than they are believed to be. He said it was also so, because people here tended to under report their actual family earnings. He mentioned several latest figures that in his view indicated a turnaround in the economy. He feels that greater flow of remittances that have touched $1.4 billion in four months, and signs of greater economic activity have equipped people with liquidity that has led to an increase in effective consumer demand. The greater level of economic activity, according to him was reflected by higher collection figures of GST (general sales tax) that has risen by 26 per cent in last five months over the same period last year. The rise in import figures of non-food, non-oil items had increased by 21 per cent, whereas exports were up by 15 per cent, Dr.Ashfaq pointed out.
Increased flow of remittances must have led to significant increase in overall consumer demand level. More so because, unlike the past, private citizens are not left with many options of secured investment in the face of falling rate of return from deposits in banks, investment in National Savings Schemes and consistent weakening of the dollar. Generally, speaking Pakistanis still view stock market investment with suspicion and few are inclined to invest in the country’s capital market.
The class, however, that we are dealing with is probably not the main beneficiary of higher inflow of remittances that started flowing into the country post-Sept 11. Only a portion of those remittances might have landed with the middle and lower middle classes—probably some part of the reported Rs 130 million that was channelled through the post offices— prompting this class to spend little extra on Eid. As for the sign of economic recovery, even if it was in the making, it is hard to see how and when it would trickle down in the form of ready cash in the hands of ordinary Pakistanis. But the question that remains is how did the cash strapped middle classes manage to make that extra expenditure on Eid?
A government servant provided partly the answer: “This once a year extra expenditure for Eid is built in financial planning of a family. We plan in advance and make sure that Eid is celebrated in a befitting manner keeping in view the status of a family”, he said. Another middle-aged office worker corroborated saying: “We are expected to provide for Eid and that we do by hook or crook”. That may be a sort of ‘keeping up with the Jones’ syndrome. But even if one accepts that families save specially for the occasion, it has not been explained as to what prompted them to save and spend more this year.
There is a need to observe the consumer behaviour more closely before jumping to conclusions. Higher consumer spending trend might be a good news for retailers but if not backed by higher earning capacity, it may not necessarily be so for the economy at large. It also is important to closely watch the composition of the increase in demand. If demand for locally manufactured items increases, it would generate comparatively more economic activity, but if the supply and demand of foreign goods (smuggled?) is on the rise, what good does that do to the feconomy?