5. Household Saving in Rural Pakistan - empirical analysis
5.3 Household income and its utilization
5.3.2 Income in kind
The total income in kind represents a significant part of the household income. Apart from crop production, livestock and its products are very important sources within this context171. Wheat, fodder, natural addition in livestock, and ceremonial gift exchange are its major components.
Table 15 shows milk, churned butter and crop produce as the major contributors of income in kind.172 The products also represent major food contents, which are consumed every day in every household. Home production of such items saves higher costs of buying them from the market. Similarly, livestock addition represents a store of money at home,173 which may help in any emergency.
Diagram 6 shows the level of cash income higher than income in kind in almost all case studies, which is a result of the cultivation and sale of highly valued cash crops like citrus and sugar-cane in the area.
170 The results obtained by BHATTI (1984) reveal facts from an area at a distance of hardly 100 km from the research area of the present study.
171 Some researchers see the distinction between agricultural and livestock income as an artificial
(empirically difficult) one within a rural subsistence economy, since outputs from one - such as straw and crop residuals from agriculture and draft power and manure from livestock - are used as inputs in the other.
172 Output and inputs need for livestock is calculated as follows:
Gross output = Growth of value of livestock + Value of milk, milk products (consumed at home and sold) + Value of bullock plowing (utilized on the farm and rented) + Value of chickens (consumed at home and sold) + Value of commercial poultry + Value of eggs (consumed at home and sold) Input = Fodder (own and purchased) + Purchased feed + Hired labour.
172 Recent work in several countries has shown that livestock is an important asset for the poor. Studies by LASSON (1981) in Bangladesh, JABBAR and GREEN (1983) in Bangladesh, and SHARMA (1982) in Nepal all show that there is an inverse relationship between farm size and livestock: small farms show a better tendency of keeping more animals per unit of land than large farms. As the agricultural sector will not be able to grow fast enough to meet the burgeoning income and employment needs of the rural population, livestock keeping may be an alternative income and employment opportunity. Another observation in these studies shows that the poor are heavily dependent on livestock income from female animal species (local cows and female buffaloes) and that livestock income from these two animals has a positive effect on income distribution. In contrast, livestock income from male buffaloes is monopolized by the rich and therefore has a negative effect on income distribution (IFPRI Rural Survey of Pakistan 1986/87 - 1988/89) (ADAMS, Jr and HE 1995:11).
SINGH (1990:206) also notes that male cattle are scarce and expensive because poor peasants cannot make heavy investments to raise healthy calves to get a return on this investment. WALKER and RYAN (1990) also note this phenomenon in India.
Table 15: Income in kind of 12 case study households in 1991-92
8,100 2,800 9,000 2,000 1,200 - 23,100
(4.2) Case study
2
35,040 7,000 67,620 2,000 800 - 1,12,460
(24.3) Case study
3
14,400 11,200 42,400 3,000 1,000 300 72,300
(20.8) Case study
4
25,600 12,000 33,400 3,000 150 100 72,250
(26.0)
7,200 5,600 15,400 2,000 250 200 30,650
(20.3) Case study
8
7,680 11,200 13,800 3,000 - 230 35,910
(26.4) Case study
9
8,580 2,100 12,200 - 1000 3000 23,880
(18.7) Case study
10
6,400 5,600 5,350 1,000 200 - 18,550
(23.7) Case study
11
3,200 - 8,102 2,000 1500 100 14,902
(47.5) Case study
12
4,800 6,000 5,858 2,000 - - 18,658
(47.8)
* Value of new-born calf is calculated according to the market price in 1991-92 All values in parentheses are the percentages of total income
Source: author’s own survey
Diagram 6: Income composition of the twelve case study households in 1991-92
0 100000 200000 300000 400000 500000 600000
1 2 3 4 5 6 7 8 9 10 11 12
Income in kind Cash Income Net Household Income
Source: author’s own survey
5.3.3 Consumption
Consumption for satisfying the basic needs of the household members is the primary utilization of household income. KEYNES (1936) in his ‘Absolute Income Hypothesis,’174 observes that the saving quota depends upon the consumption habits of a household.
The Household Integrated Economic Survey 1990/91 (GOVERNMENT OF PAKISTAN 1991:12) divides the total consumption expenditure into four categories:175 1) household expenditure only; 2) consumption of wages and salaries in kind; 3) consumption of own produced goods; 4) consumption of cash assistance, gift, dowry, inheritance and from other resources.
The present study divides the total consumption expenditure of a household into two main categories: basic consumption and ceremonial consumption. The division of consumption expenditure into these two categories may be justified on the basis of the need of information required for further analysis in the subsequent chapters. Basic consumption includes, for instance, the expenditure on the household members’ physical existence, food shared by guests and food and other items transferred to relatives, neighbors, beggars, etc. All these unavoidable expenditures can hardly be cut to increase a household’s saving rate. The only exception may be the expenses on food shared by the visitors which could be minimized to a certain extent. It is included in the category of basic consumption, since it also represents a regular item of the household’s monthly budget.
Ceremonial consumption includes the amount of household income consumed for the performance of different ceremonies and rituals. Since ceremonial expenditure is considered as a major cause of extravagance and low rate of saving, it is essential to know its actual amount in a household before discussing it as a considerable factor. This expenditure can be cut and may increase the saving of a household. It is kept in a separate
174 For theoretical explanations, see Section 2.1.4.1.
175 ALDERMAN/GARCIA (1993:39) divide consumption into two components, which , in keeping with earlier studies, are denoted as permanent consumption and transitory consumption. This latter category largely consists of ceremonies. It is included in their model of household savings to allow income to be fully spent, but it also needs to be distinguished from other consumption and savings.
category in order to differentiate it from the essential or somewhat unavoidable expenditures.
5.3.3.1 Basic Consumption
Basic consumption includes expenditure on food, fuel, transport, medicine, clothes/footwear, and hospitality, etc. and are put in the category of a household’s unavoidable expenditure. Table 16 shows a quantitative description of basic consumption in the selected case study households in 1991-92.
Table 16: Basic consumption expenditures of 12 case study households in 1991-92
Cases Net
Income Famil
y size Food 1 Fuel Trans-port
5.8 70,000 4,800 2,000 6,000 9,000 25,000 43,700 6,350
(1.2)
166,850 (30.3) Case study 2 4,62,76
0
10 80,000 6,000 1,500 2,000 15,000 20,000 2,400 3,205
(0.7)
130,105 (28.1) Case study 3 3,47,30
0
11.8 85,000 6,000 2,500 8,000 16,300 23,000 11,000 3,035 (0.9)
154,835 (44.6) Case study 4 2,77,25
0
4.5 70,000 8,000 8,000 5,000 18,000 50,000 20,000 5,705
(2.0)
184,705 (66.6) Case study 5 1,95,20
0
4.8 75,000 8,000 7,800 1000 10,000 30,850 10,600 5,380
(2.8)
148,630 (76.2) Case study 6 1,91,00
0
5.4 30,000 2,500 1000 800 8,000 5,000 8,000 5,180
(2.7)
60,480 (31.7) Case study 7 1,51,25
0
6.0 50,000 3,000 500 4,000 7,000 10,000 6,000 2,511
(1.7)
83,011 (54.9) Case study 8 1,35,91
0
8.8 50,000 5,500 6,000 2,000 10,000 20,000 3,000 7,455
(5.5)
99,500 (76.5) Case study 9 1,27,46
0
4.4 40,000 4,500 1,830 800 6,000 15,000 6,000 2,731
(2.2)
76,861 (60.4) Case study 10 78,150 7.8 35,000 4,000 3,000 2,500 10,000 10,300 4,300 1,905
(2.5)
71,005 (90.9)
Case study 11 31,402 7.0 30,000 2,300 700 2,000 3,000 10,000 4,500 725
(2.3)
53,950 (169.3)
Case study 12 39,058 7.4 20,000 2,400 500 550 2,000 5,000 2,000 565
(0.01)
33,015 (83.01) All values in parentheses are the percentages of total income
1. In the case of food all home- and market products are taken into account.
2. Miscellaneous expenditure includes toilet articles, kitchen articles, furniture items, decoration items and many other items needed everyday in a household.
Source: author’s own survey
5.3.3.2 Ceremonial Consumption
A household's own social expenditures along with exchange in cash and in kind exchange on rituals and ceremonies among biraderi members represent a major share of the total consumption expenditure. Table 17 shows a quantitative value of these expenditures under different heads.
Table 17: Ceremonial consumption expenditure in 12 case study households in 1991-92 (Rs.)
Cases
Wedding Birth Circum -cision
Death Eids 1 Charity Saddaqa2 Shab-e3
500 5,000 2,600 6,000 - 200 3,500 41,80
0
100 4,000 4,296 - 300 250 1000 89,94
6
1,550 4,500 100 200 400 21,45
0 (7.7) Case study
5
15,000 - 150 - 1,620 1200 1400 150 500 20,02
0 (10.3) Case study
6
10,000 300 - 4,000 1,095 300 200 150 16,04
5
All values in parentheses are percentages of total income
Since we are concerned with the household budget of 1991-92, only that part of consumption is mentioned which has been taken from the annual income of that year. Money spent from past savings or credit is not considered.
1. Annual religious celebration 2. A form of charity
3. A religious night
4. One of the five basic columns of Islam. A system to take the surplus money from well-to-do members of the society and give it to the destitute and needy. The taxable limit is the possession by an individual for the continuous period of one year of 52.5 tolas (1 tola = 12 gms) of silver or 7.5 tolas of gold. It is also leviable on cattle, articles of trade and produce of the soil ( SIDDIQI 1948:9ff).
Source: author’s own survey
Diagram 7: Consumption expenditure in twelve case study households
0 20000 40000 60000 80000 100000 120000 140000 160000 180000 200000
1 2 3 4 5 6 7 8 9 10 11 12
Basic Consumption Ceremonial Expenditure
Source: author’s own survey