There are about 12 million to 14 million kirana shops — family-run corner-shops/mom-and-pop or convenience stores selling groceries and other products — across India (according to a 2015 report by PricewaterhouseCoopers, a consultancy, with India Retail Forum), and they are vulnerable to losses from ‘notebandi — as demonetisation is called colloquially. A population, roughly speaking, equivalent to that of France or Thailand, depends on these stores for a living.
Prime Minister Narendra Modi, in an address to the nation six days after the original notebandi announcement, requested 50 days (up to December 30, 2016) to restore normalcy. On days 54 and 55, IndiaSpend visited 24 mom-and-pop shops in Mumbai and semi-urban, peri-urban and rural areas north to it, to assess notebandi‘s impact on small retail stores. We found that across Palghar, Thane and Mumbai districts of the Mumbai metropolitan region:
* Nearly 80 per cent of all respondents reported losses between 50 per cent and 60 per cent or greater.
* Less than 38 per cent of all stores — predominantly located in urban areas — have adapted to point-of-sale (PoS) machines or mobile-wallets, while kirana shops in rural parts still depend only on cash.
* Half of those we surveyed supported notebandi, while a greater proportion (58 per cent) continues to view Modi favourably.
The retail trade has been one of India’s economic and employment bright spots, and Mumbai is its hub.
The Mumbai metropolitan region is home to 18.3 million people, the world’s sixth largest urban agglomeration, according to a 2016 Demographia World Urban Areas report. These 18.3 million make up no more than 1.5 per cent of India’s 1.2 billion people, but they account for almost a third (29 per cent) of India’s retail spending, followed by the National Capital Region (25 per cent) and Bengaluru (15 per cent), according to a 2015 report by international property consultants Knight Frank with the Retailers Association of India.
India’s retail market is presently over $600 billion. Expanding at a compound annual growth rate of 5.8 per cent, it is regarded as the “world’s fastest growing major developing retail market”, ranking 15 on the Global Retail Development Index, in a 2015 A.T. Kearney report. The retail sector employs 8 per cent, or 35 million Indians and is the country’s third largest source of employment after agriculture and construction, with deep penetration into rural India, said a 2013 Planning Commission report. It contributes to about 15 per cent of the gross domestic product and unorganised kirana stores comprise 94 per cent of the industry. Food and groceries occupy more than half the sector, according to a 2014 Deloitte study.
The Mumbai metropolitan region also has the highest potential for modern retail in India, with its reach predicted to increase to 50 per cent (presently 13.5 per cent) of the population by 2036, particularly for daily-needs supermarkets, Knight Frank said.
“Business is now slowly recovering” was the conclusion of 60 per cent of respondents in Mumbai district and its peripheral areas of Ghodbunder and Mira-Bhayander of Thane district.
As many as 75 per cent of respondents in the semi-urban and peri-urban areas between Virar and Vasai in Palghar district said there was no significant improvement. Kirana shops we visited in the rural areas of Thane and Palghar districts said business had fallen after notebandi and has been sluggish ever since. Store-owners across the board identified tendering change to customers for the new Rs 2,000 notes as their primary hurdle post-notebandi.
With no other means to do business, all shopkeepers said they were still extending credit lines to regular customers, affecting their own ability to tide over the initial distress caused by notebandi.
Going cashless: Urban kirana shops reluctant; rural ones clueless
Responding to the government’s call to go cashless, in urban and semi-urban areas, 8 per cent of shopkeepers admitted to accepting cheques, only from regular customers. Nearly 17 per cent said they now used PoS machines in their stores, while 21 per cent said they had or will apply to banks for the device.
Of the 20 per cent of stores that have opened mobile-wallets, all reported that customers were reluctant to use them.
In rural Thane and Palghar, IndiaSpend found that none of the kirana store owners surveyed owned or intended to own a PoS device or mobile wallet. In 50 per cent of the interviews, respondents had never heard of these cashless modes. After being told how these worked, kirana owners dismissed the technology.
Among all store owners interviewed, we found nearly 60 per cent shared the same view: That either their stores were too small and the purchases made of too little value for mobile wallets and PoS machines, or their customers, like the store-owners, were not educated enough to go cashless-or both.
All 24 respondents further admitted that while, over the past few years, mom-and-pop stores were already losing significant business to modern retail shops, such as supermarket chains, the trend has accelerated since notebandi.
Indicative of the flip-flops in policy post-demonetisation, the Reserve Bank of India issued 74 notifications in 50 days according to a December 2016 report in The Indian Express.
Does organised retail = going cashless?
By 2020, India’s retail market is expected to more than double its current size to reach $1.3 trillion, according to the 2015 A.T. Kearney report. Organised retail means trading activities that are undertaken by licensed retailers who pay taxes, whether sales tax, income tax, VAT, and now, the Goods and Services Tax (GST).
Unorganised retailing, on the other hand, refers to the traditional formats of low-cost retailing — for example, the family-run kirana store, paan/beedi shops, convenience stores, hand cart and pavement vendors, who do not issue any or proper receipts for transactions and do not pay taxes.
A mainstay of India’s retail trade for centuries, these small shops are more sources of livelihood and a refuge for the educated unemployed and underemployed, said a 2014 research paper from Pondicherry University. They are rarely larger than 500 sq ft, their costs are low and margins slender, they pay few taxes and know their customers, said the study.
The GST could change this, said a financial-inclusion expert, requesting anonymity, from an international private foundation, which also funds an Indian digital-inclusion programme, if the supply chain is encouraged to do away with informal receipts. “So, a retailer can accept cash payments despite being organised,” said this expert. “The mode of payment accepted by a retailer has nothing to do with the retailer being unorganised or organised.”
Despite losses, majority still support Modi & notebandi
Traditionally, small traders and family-run kirana stores form a core vote-bank for Modi’s Bharatiya Janata Party (BJP). Although notebandi has brought adversity, half the shopkeepers we surveyed across urban, semi-urban and rural areas expressed their support for demonetisation. They believed their hardship was a by-product of””punishing the guilty ric””, a sacrifice for the good for the nation