Expenditure Elasticities in Rural West Pakistan

Internal consistency of a development plan requires, among other things, some knowledge of the way in which increments of consumption expenditure will be distributed among various goods and services. This in turn requires, as the Second Five Year Plan emphasizes1, information on consumer budgets and income elasticities of demand. Moreover, planning is not simply a matter of matching expected spon¬taneous consumer demand with supply. Both the level and pattern of con¬sumption demand must be controlled to some extent if sufficient resources are to be mobilized for development. So far, in the course of industrial development in Pakistan consumption has been controlled mainly by import licensing, rather than by tax and credit policies. This kind of control over consumption becomes increasingly less effective, however, as industrialization proceeds and is successful in substitutiing domestically produced consumption goods for imports. In order to implement an effective policy of tax and credit controls over consumption, however, there is again the need for the kind of information that comes from an analysis of family budgets. Moreover, knowledge of income elasticities of demand has a special role to play in Pakistan in view of the large import of food grains by this country under the PL 480 programme. Effective utilization of these imports requires some information about the consumption pattern of the people of that area where they are to be absorbed.