Pakistan’s middle class consumer market assessed on the basis of reports of market research companies and data from multiple sources is projected at Rs30tr ($290bn). Adding the share of the country’s huge informal market would make the numbers fly higher.

“The sales data of different items, like Honda selling 70,000 motorbikes in October, leaves one wondering about the purchasing capacity of Pakistani households. But in the absence of proper consolidated sales data, it would be hard to defend any projection,” a seasoned economist commented.

The spending habits of the middle-class households are transforming fast as they aspire to climb higher on the social ladder and enter traditional bazaars, modern malls or switch to online shopping. With the pickup in GDP growth, many households are joining the millions enjoying discretionary consumption.

It poses both an opportunity and a challenge to existing companies and interested global players — inspired by the stellar performance of multinational fast moving consumer goods companies (FMCGs), and electronics, food, clothing, cosmetics, drug and auto industry firms — as they aspire to enter the Pakistani market.

This vibrant middle class, which is understood to be a trendsetter, is expected to expand by over 6pc annually in the next few years

The companies active in Pakistan will need to build flexibilities into their systems to make quick adjustments to match the changing preference of consumers. It will also be necessary as more foreign companies ultimately enter the domestic market, intensifying competition.

Besides closely observing the market for changes, the old players will have to monitor the actions of their current and future potential competitors that will drive companies to offer better value for the money spent.

Experts define the middle class in different ways, including on the basis of income and people’s spending on food, transportation, entertainment etc, as well as investment in education and healthcare. More importantly, the consumption-oriented middle class is not just a beneficiary of economic growth but is also a major factor contributing to it.

On average, this vibrant middle class, which is understood to be a trendsetter, is expected to expand by over 6pc annually in the next few years, i.e. at nearly double the real GDP growth rate (economic growth rate minus population growth rate). The GDP growth rate expectations are over 5pc per year and the population growth rate is projected at 1.5pc.

In its Global Wealth Report 2015, Credit Suisse said Pakistan had the 18th largest middle class (6.27m people) in the world. Unlike the more common practice of using income and the standard of living to define a social class, Credit Suisse used the measure of ‘personal wealth band’ to determine the middle class.

According to the bank, to be a member of the middle class in 2015, a Pakistani adult must have a wealth of at least $14,413. At a rate of Rs106 to a dollar, this comes to Rs1.53m.

The bank calculated the total wealth in Pakistan at $495bn, or Rs52.47tr. It used the IMF’s series of purchasing power parity to drive the equivalent middle class wealth bounds in local terms.

In a 2011 publication titled ‘Estimating the middle class in Pakistan,’ Dr Dur-e-Nayab, an economist associated with the Pakistan Institute of Development Economics (PIDE), came up with a figure of 61m people (about 40pc of the population) for the country’s middle class. The categorisation was on the basis of a criterion she called ‘expanded middle class’.

On the basis of the same definition, the Indian middle class is estimated to be 25pc of that country’s population. She did not comment on the economy of this class in Pakistan while talking to this writer over phone from Islamabad.

Many top tier local companies and multinationals have commissioned research studies on the size, value, trends and spending capacities of different social classes in Pakistan from reputable service providers, such as Euromonitor, McKinsey, Neilson etc to evolve their corporate strategy in the country.

A few senior executives were approached but termed the relevant material ‘confidential’.

Overseas Investors Chamber of Commerce and Industry (OICCI) Secretary General M. Abdul Aleem was helpful and said valuing the country’s middle class market at Rs30tr appeared credible.

“On the basis of the current material available online and with privileged access to some confidential reports of certain OICCI members on some segments, the projected value should not be too off the mark,” he commented over phone.

Sakib Sherani, CEO of Macro Economic Insights, a consultancy firm, found the projection exaggerated. He told this writer that he did a study to gauge the worth of this segment of the market sometime back and the results were different.

“In my opinion, these projections appear to be on the higher side. My estimate is closer to $250bn (Rs26.5tr), inclusive of the documented as well as the undocumented economy,” he said in a written response.

PIDE VC Dr Asad Zaman was out of the country and other senior staff declined to offer formal comments on the projection of the middle class economy.

Dr Nadeem Javed, chief economist at the Planning Commission, was approached but his response was not made available in time.

Most businessmen from the medium-scale industry did not express much interest in the subject as their focus was too narrow to care for what goes on beyond their area of interest.

Published in Dawn, Business & Finance weekly, November 23rd, 2015