LAHORE,PK: Go to any market or a department store, you'd find it brimming with people. Yet the retailers complain of declining sales and squeezing margins. In bazaars that are catering to the demands of the middle classes the situation is worse.
Shopkeepers and salesmen would actually scramble to somehow tempt prospective buyers into their shops with their "irresistible" offers of lower prices. "This is not a new situation. We're coping with it for several years now," says Zahid Butt who sells readymade garments. "People are not spending. They would enter the shops and stores and leave them without buying anything. They don't have money to spend."
As the people's income shrinks, the situation gets even worse. In the last three years, according to a rough estimate, the hikes in the patrol prices and the utility tariffs have put a burden of at least Rs2,500-3,500 per month on the budgets of a middle class family of five persons. On the other hand their income has failed to increase proportionately, resulting in a decline in the living standards.
"People are now spending only on the items that are absolutely essential for them. Even a lot of people avoid going to doctor to save whatever little money they have," says Yawar Irfan Khan, who owns a chain of stores selling readymade garments.
The situation has led to a sort of recession in the market, he says. "When income shrinks, or does not increase in proportion to inflation, consumers tend to cut back spending on even essential items like drugs, clothes and shoes. How many people from the so- called white collar families now eat out? Very few, I'd say. And, that too, occasionally," Khan says.
A visit to the market clearly reveals that people have stopped or slashed their spending on such items as books, clothes, shoes, toiletries and even food. "My permanent, years-old customers, who used to buy a pair of shoes every six months, now visit us once a year," says Farhan Zia, a salesman at a shoe store on the Mall.
Economist Salman Shah says the "shrinking income of the middle classes has had an enormous impact on the domestic industry. If the domestic demand declines, the industry also shrinks. When the consumer confidence recedes, the industry also feels the pinch.
However, he says, it cannot be said with certainty that income of the people is decreasing. "After all the economy is growing at slow pace. So the income of people should also be rising though not in proportion to the prices and the cost of living."
While the sales of the general goods is falling, the producers of consumer durable like fridges, TVs, washing machines and fans claim that their production has grown in the last couple of years or more. "Television assembling has grown at a rate of 20 per cent in the last five years. From 70,000 units five years back, we are now selling 450,000 a year," says Haroon Niazi, a TV assembler.
Same is the case with the local producers/manufacturers of theother consumer durables.
"My impression is that consumer market is growing. It is a bit a controversial but it is the reality," says marketing manager of a producers of refrigerators, airconditioners and such items. His assertion is corroborated by the retailers.
But their sales have not grown due to any increase in people's disposable income. It is mainly due to better checks and controls over smuggling of similar items either through the Afghan Transit Trade or other sources. "The analysis is true to a great extent," concedes Niazi. But, he says, these items are a necessity and the people don't mind stretching themselves a bit to buy them because these last for years.
Shah, however, does not agree with the assertion that consumer spending has increased. "First, we should analyze all the sectors together. While a few sectors might be growing, others are dying. If you do a comprehensive study, you may discover that the growth registered by some sectors is normal, routine owing to increasing population as well as (improved) remittances sent by the overseas Pakistanis. These sectors may be growing but they are not growing at a desirable rate, which is impossible to be attained without an increase in the disposable income of people. The overall domestic demand has substantially come down if you (carefully) look at the spending on clothes, food and such other things," he insists.
"Majority of people who are still spending despite the general economic conditions are from the privileged segments of society, not from the middle classes," Khan says.
"A common man with monthly income of Rs20,000 can't even think of buying clothes for himself and his family once a month. He has other worries, other expenses like increase in electricity charges or patrol prices or increment in house rent to meet," he says. "I fear the people may revolt if they're squeezed any further. Won't they," he asks, adding that the "industry is quite worried about the situation."
In order to reach out to middle classes of society without any disposable income, Niazi says the industry would have to "improve its efficiency and somehow reduce production cost a few year down the road to hold down the prices or at least stabilize them at the current level."
"Besides, we'll have to promote credit economy in this country so that those who do not have enough income to buy costlier items like a fridge are able to obtain consumer financing from banks or other financial institutions on really low interest rates and pay them back in easy instalments," he says. "The government is doing something on this but it would take some time because it requires changes in the laws (governing the functioning of the banks)."
Shah feels that the government "needs to slash taxes to enable the (middle class) people spend part of their discretionary money on general consumer items and improve their living standards"
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