Small traders, big problems

- September 4, 2020
| By : Mihir Srivastava |

Small retailers in the informal sector kept the supply of essential commodities running during the lockdown. Now, in want of government support, they are losing market to online retail….   When everything was lockdown during the first few months of the pandemic, the convenient online retail where you get all you need at your doorstep wasn’t […]

Small retailers in the informal sector kept the supply of essential commodities running during the lockdown. Now, in want of government support, they are losing market to online retail….  

When everything was lockdown during the first few months of the pandemic, the convenient online retail where you get all you need at your doorstep wasn’t not functioning, and people at large were forced huddled inside their homes for weeks together, it was the small retail, the local grocery shop, and the vegetable and fruit vendors who kept the supply of essential commodities going and mitigated the extent of the crisis.

And now five months later, despite the the unprecedented rise in the number of Covid patients, the economy is being opened in a phased manner. The worst losers are the small retailers, hawkers and peddlers, who find themselves at the receiving end, as the market share of online retails giants, like the Amazon, are showing a sharp increase.

“The small retailers served the people putting themselves to risk during the pandemic, and now their livelihood is being ignored, and the new economic impetus was given by the government (of India) blatantly favour the big companies—the organised sector—at our cost,” says V K Bansal, general secretary of the Federation of All India Vyapar Mandal (FAIVM), and adds, “We in the organised sector provide 90 percent of the employment and therefore provided purchasing power to millions of people who in turn go and buy in the market and the economic cycle is strengthened and growth ensured.”

VK Bansal

The present slump in the economy is due to a lack of effective demand in the market as the purchasing power of people has shrunk due to job and livelihood loss. People are not earning, as primarily in the informal sector—account for petty, small scale business—has been severely affected. Bansal agrees with the Congress leader, Rahul Gandhi, who recently explained that India in the past was able to deal with global slowdown simply because of a huge, flourishing, vibrant, self-sustaining and employment generating informal sector that remained broadly unaffected by the global economic trends. Bansal feels the pandemic and the recent economic measures like the GST and note bandi has had an adverse effected the informal sector and small businesses.

As a result, people are earning less, small businesses are destroyed, and a major chunk of the workforce lost employment, as was evident in the mass exodus of the working class from the capital within days of starting of the lockdown.  “There is an effort to bring the informal economy within the fold of the regulated economic system. Note bandi, faulty introduction and implementation of GST and the subsequent measures to stop all organized cash transfers should stop—as this is the traditional way of functioning in the informal sector, small traditional enterprises function,” Bansal explains.

Recent numbers support Bansal’s fears. While loss of jobs and unemployment is high, many having lost their jobs in the last few months due to the pandemic, it is also true that in the last few years there has been an increase in the formalisation of jobs—or erosion of the informal sector in favour of the organized. The incumbent government lists this trend as an achievement as there has been an enhancement of legally enforceable rights of workers that includes emoluments and social protection. But in absolute terms, the number of people employed has shrunk drastically.

  1. The small retailers make this point forcefully: job for most is far more important than good jobs for a select few. Bansal warns, that because of the erosion of gainful employment, the collective stress of the frustrated workforce is on the rise.  And there’s no point in imitating the Western economic models as the ground realities in India is fairly different.

For example, Davinder Jain has a small retail hosiery shop in Pahari Dhiraj in Sadar Bazar area.  His sales have dipped by half. The primary reason for it, according to Jain is that “people don’t have money because they are not earning much. And whatever little they have, want to spend on things necessary like food and medicines,” he says. Jain follows the economic policies diligently explains in Hindi that they recently introduced economic impetus package “has had little impact on the ground. The benefits are reaching the organized sector and not to the needy small businesses.”

Divender Jain in his shop at Sadar Bazar

He warns it’s the informal sector, that accounts for a major chunk of voters, is not happy, and faulty economic policies will have adverse political impacts. He gives the example of how private hospitals are charging 5 to 10 lakh for the treatment of Covid-19, which he says with emphasis, “has no cure or vaccine to arrest its spread.” The big corporate entities are cashing in a crisis of this pandemic proportions, he laments.
Manoj Agarwal has a grocery shop on the first floor while the second floor is dedicated to Kitchenware in Devali Road in Khanpur.  Agrawal employs 7 people in his shop and his sales have decreased by 40 percent since the lockdown was relaxed and is frustrated he lost a substantial part of his business to the online retail sector. “I fail to understand how the online retail is able to offer products at the price less than the distribution price here in Delhi,” he thinks loudly.

Of course, the big online companies buy in bulk, enjoy the benefits of economies of scale, and don’t have to deal with the costs of retail infrastructure, costs of running a shop, rentals, etc.  “If that’s the case, we will soon be out of the business unless the government decides to support us and not them,” says Agarwal.

The situation is even worse when it comes to petty traders like hawkers and peddlers. There’s no clear estimate, but thousands of casual labours have lost their jobs in factories, construction sites, and other small business enterprises. Budaun’s Ramesh Chandra, 55, looks much older and sells vegetables in Sector 37 area in Noida on a trolley or thela.  He’s the sole breadwinner of a family of 7. His three younger brothers, who had jobs in the local factories are now dependent on him. He advised them to sell cigarettes, vegetables and fruit for want of something better. “The number of people selling fruits and vegetables has doubled in Noida,” he says but the sales have dropped significantly. We are barely managing to make to survive, but for how long? This arrangement is not sustainable,” he explains in Hindi.

Just to give an idea, a four-hour notice followed by a near complete shutdown of all economic activities imparted a devastating impact on the labour market. According to the study by Shiney Chakraborty of the Institute of Social Studies Trust, “The unemployment rate had increased manifold. According to the Centre for Monitoring Indian Economy’s Consumer Pyramids Household Survey, the unemployment rates in April and May were over 23% in India, which was three times higher from the value last year. The cessation of all economic activities would result in a prolonged dip in informal sector workers.” Further, “Informal sector workers who survive on meagre wages are in desperate need of food, and universalising the public distribution system with a higher quantity of foodgrain allotment for at least the next few months will help them fight hunger and abject poverty. The impact of this pandemic on informal workers’ wages/income is already devastating, and there is a dire need to provide some cash transfer to every household to those known to be more vulnerable.”

Ramesh’s stall

To add to his miseries, in Noida, there was a partial lockdown during the weekends. Ramesh Chandra’s brother had to pay Rs 4000 as fine for running his cigarettes stall on a weekend. “He lost a month’s income in a day,” says Ramesh, “It feels like being poor is a crime, a curse,” he adds, dejectedly.

Weekends is when the footfall is the highest, and shut the markets, a consumer is forced to go online to get essential goods explains Bansal, who’s not happy. “All the efforts to contain the spread of pandemic necessary translate into putting restrictions on the shopkeepers and petty traders. The most vulnerable have to face the consequences of the government’s harsh measures. And the benefits get passed on the big corporates that run the online retail, who have captured the market in the electronics goods, particular mobile. Small traders need protection,” he implores. Though, thankfully, after weeks, the Noida authorities have decided to observe lockdown only on Sunday instead of the whole weekend.

People who have buying power are either government employees, or work for the MNCs or employed in the corporate sector. They together don’t even add up to 5 percent of the population. Though there’s a crisis in the formal sector too, which augments the economic crisis. The latest data from the Centre for Monitoring Indian Economy shows that during April 2020-July 2020 there was an estimated total loss of salaried jobs was 18.9 million. Given this, the real problem is that of lack of demand as the incomes eroding, and eating into the household savings.

Bansal offers a solution, to give cash subsidy and easy loans to the smaller business enterprises so that they can start functioning, in the process, a huge segment of the population would start earning which in turn will enhance demand and sales, which will be passed on the to the employees as salaries and the whole economic cycles will restart, and grow in strength. For that to happen, “we need government support. It’s a question of life and death,” he concludes.

(Cover: Busy market before lockdown)