Divergent Trends

  • Where is the disposable income coming from?

During Ramzan a friend wanted to invite a bunch of other friends for an iftar and dinner. We decided to go out rather than impose on the friend’s family. But, interestingly, we found that though this friend of ours called a number of places on M M Alam Road in Lahore and surrounding areas, where there are a lot of restaurants, he could not get even a reservation for four-five people. A number of restaurants said they were fully booked, while others insisted on getting advance payment for the booking. The advance booking, from the restaurants perspective, covers them against no shows, but it does tell us about the bargaining power between the restaurants and the customers: the restaurants were quite flushed with customers.
The restaurants we are talking about are not the cheapest ones around. They cater to the upper middle class and charge significantly. Finally, we did find a place in one of the restaurants. It was quite an amazing experience. There were hundreds of people there for the iftar and the lines, around food tables, were like at marriage functions. There were entire families, of ten, fifteen, or more people there. At Rs 1,500 or more per person, the iftar would have cost each family a fair amount. But that didn’t seem to be a concern.
In Islamabad, I witnessed the same rush at another iftar and another expensive restaurant. When I checked with some friends, who go out more often than I do, I was told that the same thing held almost through the entire Ramzan and most of the better known restaurants did roaring business during the holy month.
About a week to ten days before Eid the markets started becoming very crowded from about 8:30 pm onwards till closing time. And the closing time kept getting later and later as the Eid neared. It was almost impossible to go to Jinnah and Jinnah Super markets in Islamabad during these times. The markets were extremely crowded, it was almost impossible to find parking and even manoeuvring through the traffic was not easy. Even with a lot of traffic police around, just the sheer number of vehicles and people, out shopping, made it very difficult to move around. I had to go one day, in the evening, to pick up my prescription glasses, and it took me a good 45 minutes to make the trip, largely due to the distance I had to park my car at and then walk to the market and back.
I have checked with a number of trader and shop owner friends and they do acknowledge that business was brisk this Eid season. In fact, even after Eid days, since the holidays continued into the weekend, there was quite an extended shopping period around this Eid.
This is wonderful news. There has been a class, at the very top in Pakistan, who have had it good for some time now. But this phenomenon, described above, seems broader than that class. Is the economy picking up? Is there something happening with incomes that we do not know about? Clearly, a class or sub-class has gotten some income that is being disposed of. How wide is the class or group and what is the basis for this prosperity? Will the phenomena become wide enough to allow for economy’s wide growth and broader sharing of the fruits of the growth? And most importantly, we have to understand where this growth/income is coming from?
I have not seen any work on this development yet. In fact, I am not even sure if it is a phenomenon that has been picked up widely enough or is even happening widely enough. My description above is based on my observation, on a fairly narrow base, and my conversations with friends and acquaintances, which nonetheless still forms a very narrow base.
But people do say that the increase in prices of wheat and some other commodities that the government has allowed has given a fair number of rural population much higher disposable income. Is that income percolating in trading class and in the shops? It could indeed be that. But if it is just that, it is not going to be a sustainable means of income growth or output growth. Once the increase has passed through and inflationary adjustments have been made by other income groups, we will not see much of a growth phenomenon afterwards.
At the same time, there are clear signs of increasing destitution and desperation in other groups of people. The lines that I now see, in the mornings, in places where daily wage earners tend to gather, again in Islamabad and Lahore, are getting longer. And most of these people are still there in the afternoon or evening. Jobs, in construction and so on, do not seem to be increasing at the same rate as people looking for jobs are joining lines. People seeking help, directly or indirectly, openly or not-so openly, are increasing significantly. Even the ‘safed-posh’ from the lower middle and middle income groups seem to be facing much more tighter economic times. Prostitution seems to be on the rise as well and becoming more and more visible in these cities. Petty crime has increased manifold as well. Inflation is exacting a heavy price from the poor, the lower and middle income quintiles and from groups on fixed incomes such as the salaried or pensioners.
The government does not produce detailed or frequent enough statistics on consumer confidence, consumption and/or income based breakdowns of consumption, so it is hard to understand if indeed, there are these trends that have been anecdotally and observationally picked up there in the economy or not. But if these trends are there, it is very important for policymakers to understand them. Where is this disposable income coming from? Is it sustainable, can it spread across the economy? Is it just a bubble? Which classes are suffering more from inflation than others? What can differentially be done for these classes to ease their suffering?
Clearly, we cannot afford not to capitalise on any good trends that might be present or could become larger and we cannot afford to allow significant groups of people to get destitute and desperate. We are in a very precarious economic situation and given the vulnerability of large numbers the smallest of shocks can have significant consequences for large numbers of people. It is imperative that policymakers investigate the trends discussed.

From Pakistan Today, Pakistan, Tuesday, September 13th, 2011.

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3 thoughts on “Divergent Trends

  1. Hi Faisal,
    In my opinion the example of Iftar/dinner at M M Alam Road, Lahore is not a litmus test for the disposable income. Reason, lets say there are 100 food outlets on that street, and each has capacity to accommodate say 500 people at one time. So it means total 50,000 people at that place. I’ll assume about same number of people in couple of other posh areas culinary areas. So in total 500,000 people at one time. Right ? If Lahore’s population is 10,000,000, this 500,000 constitutes just about 5 % of the city population.
    In my opinion this 5 to 7 % of population is always there to have a good life all the time. The issue at hand is of the rest of 95% or lets be have a safer assumption of 70% of the population. And for this sector the income in hand is squeezing at very fast rate. Number of business sectors are converting their permanent jobs to daily wages, for the reason that business is at just its 30% capacity due to power shutdowns ranging from 8 to 14 hours a day, non-existence of any direction by provincial / federal governments, Karachi being at stand still, etc etc etc.

    Dear Faisal, just try to get data of how many people this year from general public will help their country-men dislocated in current floods.

    • the point highlighted by the author is so much correct, and is a very common observation. Being a university student i also wonder how come the students spend so much and all the time in university cafe given that now university cafes are no more simple canteens of educational institutions rather in most of the universities these have been converted into mini resturants. Now this has obviously been done in the light of the emerging demand for fancy foods even by university students who have to visit these cafes almost regularly. And since now BS classes are also conducted within the universities premises so this heavy demand of expensive eatables is also largely coming from BS students who are mostly totally dependent on their parents. and then this phenomenon is not at all specific to any particular university that one can say that it only make or represent the upper 5%. you can take the figure roughly to atleast 10% to 15% because the students in my surroundings mostly belong to middle class. This factor is in addition to the point that university fees are also being increased regularly on semester basis and if we look at the per credit payments required of these students coming from middle class families it is really difficult to explain the sources of this excessive flow of money into the society and the careless spendings by the people.
      Abdul Wahab

  2. Hi Omar,
    Thank you for the comment. I agree with the larger point you are making….as I said I do not know how large is the phenomenon I described and how deep and/or how sustainable. I was just giving an observation from last few weeks.
    In terms of the example you gave….if it is 500,000 people in one night…think how many people came out for iftar over the month….then the numbers, in percentage terms, will look better.
    But even then, as I said, I do not know if it is a big issue. You think it is not…and you might be very right. I do not have statistics to go one way or the other.
    Thank you.

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