Pakistan has witnessed the longest spell of strong economic growth for five years (2003-07) in a row during the decade of 2000. Growth, which averaged almost seven percent per annum, was broad-based with manufacturing, agriculture and services sectors posting robust growth. Instead of acknowledging and appreciating the growth performances of half a decade, some so called ‘experts’ began to criticise these vehemently and continued to do so until the growth momentum was halted in 2007-08. Post 2007-08, the ‘experts’ continued to demean the achievements on the ground that Pakistan’s economic growth was consumption-led and not production or export-led. For them, the uninterrupted growth performance was not kosher. It is clear that either the ‘experts’ were not aware of the importance of consumerism in promoting and sustaining growth momentum or they knew very well but decided to downplay the performance for personal and political motives. In my earlier articles (March 23 and 30, 2010), I discussed the issue of consumerism and economic growth in depth. Growth in developing countries will always be consumption-led because of its share in GDP, which ranges from 70 to 75 percent. In the case of Pakistan, it has averaged 72 percent during 2003-07. Any increase in real private consumption expenditure with weight of over 70 percent would, by definition, be a consumption-led growth. How does consumerism promote growth and support growth momentum? There is a close linkage amongst economic growth, rise in per capita income, growing consumerism, proliferation of branded products and retail modernisation. Higher economic growth leads to rise in per capita income, which in turn leads to a shift in consumption pattern from necessity items to discretionary consumption. With economic liberalisation continuing, various international brands enter the domestic market. Consumer awareness increases and consumers tend to experiment with different international brands. The proliferation of brands leads to increase in retail space. Thus, retail modernisation is a part of the development process. Higher consumer spending feeds back into economic activity by creating more demand for goods and services which encourages more investments in plants, equipments, services and real estate. These investments create jobs which further stimulate demand. Higher consumer spending also signals the emergence of a strong middle class with growing purchasing power. It should be clear that the very act of consumption is likely to encourage the private sector to expand their businesses to meet the growing demand. While ‘experts’ vehemently criticised consumerism in Pakistan including the unprecedented surge in cellular phones, automobiles, electronic items etc, the other emerging economies continued to pursue consumerism as their policy. For example, Indonesia, India and Vietnam promoted consumerism as a policy to promote and sustain economic growth. From investment perspectives, these countries have emerged as the most exciting destinations for the investors. Over the past decade, the real GDP and per capita income have grown at an average rate of seven and five percent respectively in India. During the period, the number of rich and middle-income increased by 21.4 percent and 12.9 percent respectively, with a corresponding fall in poverty. With a growing middle class, rising GDP and disposable income, there is a notable change in the spending patterns of Indian consumers. Consumption accounts for 60 percent of the GDP in India. It was ranked the 12th largest consumer market in the world in 2007 and is expected to be the fifth by 2025 after the US, Japan, China and the UK. Indian consumers are becoming more brand conscious. The changing shopping patterns and rising brand consciousness among the Indian consumers are driving the growth of the retail sector in India. The Indian government has realised that growing consumerism and brand consciousness can help sustain higher economic growth. As a result, India formulated a brand-based retail FDI policy in 2006. India is probably the only country that has a brand-based retail FDI policy. Such a policy has benefited India greatly as several foreign retailers, including Giorgio Armani (Italy), Louis Vuitton (France), Rino Greggio (Argentina) and Signature Kitchens (Malaysia) have entered the Indian market. As a result of uninterrupted growth of 10 percent per annum over three decades, China has seen the emergence of a large and growing middle class with buying power. China is now the world’s largest consumer market with the use of automobiles surpassing the United States in 2011; it is the second largest luxury goods market in the world as well. The Chinese government is promoting consumerism as one of its priorities in its five-year plan. All emerging economies have realised the importance of promoting consumerism to promote and sustain higher economic growth. It is only in Pakistan that some ‘experts’ for their personal and political motives misguided the people of Pakistan through the print and electronic media. The newspaper columnists and TV anchor persons also joined the bandwagon in criticising consumerism. What an irony this is? The previous regime was criticised for promoting cell phones in the country. People sarcastically questioned as to how the increase in the use of mobile phones would contribute to growth. Today, the same cellular companies have kept more than 50 TV channels alive. Over three-fourth of their advertisement-revenue is coming from the cellular companies. They contribute 10 percent to FBR’s total tax collection and still employ business graduates even in such a depressed economic environment. There is nothing wrong with consumerism for promoting and sustaining economic growth. Consumerism is the reflection of rising living standards and the emergence of a strong middle class. It is the cherished goal of every government to improve the living standards of their people. Consumerism is an important phenomenon for achieving that goal. Consumerism helped India to join the elite group of G-20 countries. Pakistan, on the other hand, lost its growth momentum and is now a forgotten economy, thanks to the so-called ‘experts’.
The writer is principal and dean, NUST Business School, Islamabad. Email: ahkhan@nbs. edu.pk
