Over the weekend, in a live telephonic conversation with the public, the Prime Minister received a call from a woman looking for answers. The female caller asked the Premier whether it was time to abandon his mantra of “ghabrana nahin hai” given how difficult it is for families to make ends meet—day to day—due to the rising cost of living. Can people start worrying now? the caller asked. The natural next question is: is she alone in this worry?

In response, the PM urged folks sitting at home to remain patient and that the economy was moving into recovery. In a similar vein, SBP’s Governor Reza Baqir only recently claimed that the economy had achieved stabilization and it was now time to focus on growth and job creation.

In latest numbers however, headline inflation is moving up again (9% in Mar-21), likely to remain under pressure over the next few months (read more: “Inflationary pressures: staying put?”, April 5, 2021). This expectation is reflected in consumer sentiments. As per the latest round of the SBP’s Consumer Confidence Index (CCI) (a total of 1,669 households were surveyed), overall consumer confidence is down by 4.5 percent in Mar-21 while overall inflation expectations are up 2.9 percent compared to the previous wave conducted in Jan-21. In fact, since this time last year, inflations expectations have grown rather rapidly. According to the same survey, more respondents expect unemployment over the next few months compared to only three months ago, while outlook for better financial conditions of households in the next six months is also down.

A survey conducted earlier by Dun & Bradsheet and Gallup Pakistan found that while consumer confidence was improving, it still remained pessimistic. There are some wins within the survey—for instance, household financial situation was improving and becoming more optimistic. The survey attributes this to improved business activity.

That brings us to the second economic agent after households and individuals: businesses. In contrast with consumer confidence, business confidence is booming, for lack of a better adjective. This is reflected in the SBP’s and Gallup’s respective surveys and corroborated by production numbers under Large-Scale Manufacturing (LSM).

In Jan-21, the LSM grew 9.1 percent year on year with the highest ever cumulative value for 7MFY21 (read more: “LSM: March towards double-digit growth”, Mar 18, 2021). In fact, growth by the end of the year could touch 15 percent.

The surveys are mostly positive. While checking the business pulse of 427 firms in Feb-21, the SBP showed persistent improvement in business sentiments and substantial bump since this time last year. Meanwhile, current and expected employment are moving in the green zone, according to these firms (i.e., more positive views than negative views). Similarly, Gallup’s Business Confidence Index for its fourth quarter surveying about 400 businesses had similar findings. More than half—53 percent businesses in Pakistan—believe that the country is headed in the right direction while 60 percent reported good business conditions.

In short, business confidence is up, but consumer confidence is on shaky ground. Both agents are looking at the same factors. For instance, inflation brings up cost of goods for businesses, while it increases cost of consumption for consumers. Rising covid-19 cases too are sure to impact both consumers and businesses—for the former, it may mean loss of employment (in addition to higher cost of healthcare), and the latter may be impacted from a loss of business. The relationship is also clear: businesses need consumers to buy and people need employment to afford those goods. Surely, consumers and business sentiments should move in tandem?

But there are several missing pieces here. One missing nuance is government involvement. From construction package, to concessionary financing schemes, to subsidies and so on—government support is clearly leading to a better future outlook for businesses (though among businesses too, there may be some better off than others). For consumers however, there is not much direct relief. But the point is not to present a case for or against subsidies or tax reductions or relief packages for businesses and consumers. That would be too easy; and temporary.

The gap between consumer and business confidence indicates that the task at hand for the government and the newly appointed 25-member Economic Advisory Council is much tougher. How to move away from ad-hoc policies of subsidies/ tax-breaks and temporary reliefs toward long-term reforms that lead to inclusive growth, down to the very last individual?

The questions policy makers need to be probing are: how to stop relying on stop-gap and band-aid solutions, how to make sure that the poor are not left behind, how to fill the inequality gaps, how to improve standards of living, how to ensure small businesses and traders are not worse off than big ones, how to provide not just more jobs but better jobs to the burgeoning youth, how to ease doing business while providing an enabling competitive business environment so consumers get better goods at affordable prices and so on.

There are no easy answers. If past is prologue, these questions have been asked and have been left unanswered, with the economy almost always slipping into another cycle of destabilization. That does not mean, however, that we should not keep raising them.