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Making little business sense

There may be a lot of economic activity at Iftar and sehri but it may not translate into more profits

Making little business sense

As soon as Ramzan begins, the retailers and brands wake up to the opportunity of making some extra money. Household spendings on food, clothes and gifts go up. So does the spirit of donations, as Muslims believe the reward for charity in Ramzan is doubled. The Ramzan economy is huge in Pakistan.

Sikander Atta, owner of a general store in Dharampura, Lahore tells TNS that it is a normal practice for them to start storing basic food items like sugar, flour, cooking oil, and rice at least a month before the start of the holy month because people purchase in bulk for not just themselves but also for the needy.

“We usually prepare a Ramzan ration package, carrying the basic items a small family needs. It is because generous people and organisations come and give us money as charity so that we can distribute ration amongst the poor,” says Atta, adding, “besides, people spend more than usual on food items for themselves.”

This starts an economic cycle that brings profit to retailers and wholesalers dealing in food items.

Besides zakat, Muslims pay fitrana in Ramzan. The amount of fitrana has been fixed at Rs100 (equal to 2.25kg flour) per head this year by the Ruet-e-Hilal committee. According to the committee, the faithful who want to pay fitrana equal to the price of barley, dates, raisins and cheese should pay Rs400, 1,600, 1,920, and 2,940 per head respectively. This act of religious charity does increase the buying power of the poor and eventually boosts economic activity.

Fruit market is another place where the pace of business activity increases. Fruits, juices, and dates are considered the traditional but very important part of the iftar menu. Selling fruits and dates in Ramzan becomes a lucrative business. This is reflected in a sudden increase in the number of vendors.

Bashir Khan, a fruitseller based in Badami Bagh tells TNS that the demand of fruits and dates doubles in Ramzan but, unfortunately, the price increases threefold. “The demand of fruits remains high in the first ten days but decreases between 11th to 25th of Ramzan and again goes up in the last five days. Dates remain in high demand for the whole month.”

Bashir Khan, a fruitseller based in Badami Bagh tells TNS that the demand for fruits and dates doubles in Ramzan but, unfortunately, the price increases threefold. “The demand of fruits remains high in the first ten days but decreases between 11th to 25th of Ramzan

Printing and publishing houses start hiring people just before the holy month and get ready to work in three shifts. President All Pakistan Traders Association, Khalid Pervez Malik, tells TNS that the business they get during Ramzan is equal to what they get during the rest of the year. “Urdu Bazar is the largest market in the country. We get orders of millions of copies of the holy Quran and other Islamic books. In fact, we have to work in three shifts to deliver the orders we get from all parts of the country.”

Though good and healthy food is the main focus at sehri and iftaar time, still the profit margins of restaurants and bakeries go down. Sadaqat Rahim, Director Bundu Khan Restaurants and Bakers, say, “our business decreases at least five times in the month of Ramzan. “There are only a couple of hours at iftar and sehri time for restaurants to cater to customers. Though restaurants look busy in Ramzan, they make no profit after the 30 holy days. Likewise, business of bakery products, such as cakes, sweets and other items goes down. Breakfast and lunch, which are not served during this month, are sources of actual business otherwise.”

According to Sadaqat, sale of bakery items gets a boost in the last five days of Ramzan when people start visiting their relatives, and “it remains so till Eid days”. Overall, the restaurant and bakery industry bears losses, because “expenditures do not come down, the number of customers does”. However, small restaurants situated in busy markets earn profits because they do not have to spend on what A-category restaurants have to.”

Sadaqat has a point. “The price of raw material is always high during the month but it’s difficult to increase prices because of the competition.”

Also read: Editorial

There is another impact of Ramzan on the economy. A number of studies show that fasting can have an impact on productivity and economic output. Naturally, the longer the period of fasting, the greater the effect — this is particularly so when Ramzan falls during the summer. A two-hour reduction in the working hours in public offices and three hour reduction in banks, brings an estimated 7.7 per cent decrease in the country’s monthly GDP.

Data collected and represented by Filipe R. Campante and David H. Yanagizawa-Drott in their report, “Does Religion Affect Economic Growth and Happiness? Evidence from Ramadan,” (The Quarterly Journal of Economics, Oxford University) shows that productivity in Muslim majority countries decreases in between 35 per cent to 50 per cent as a result of shorter working hours and the change in behaviour. Productivity declines not only due to physical strain of fasting but from the disruption to work. “It is reasonable to assume that decline in productivity would further reduce economic output by at least 3 per cent each year, which represents a significant annual recessionary impact.”

Shehryar Warraich

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The author is a member of the staff and can be reached at [email protected]

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