Nayan Lapsia spent much of a humid Wednesday afternoon looking despairingly at the idle cash register at his store in Crawford Market, a colonial-era open-air market in the heart of Mumbai, India’s financial capital. Though customers have stopped by fleetingly to glance at goods, things were unusually quiet at his shop, Shah Bhavanji Kunvarji & Company, which is stacked with all manner of spices and dry fruit.
In Crawford Market, a bustling labyrinth of narrow lanes lined with small stores selling a wide range of groceries, a sense of despair hangs in the air these days. Shopkeepers complain of declining sales coupled with the rising cost of living. Lapsia said the prices of his goods, many of which are imported, have risen nearly 40 per cent over the past three months, hurting sales, which have fallen about 30 per cent.
With general elections looming on the horizon, Crawford Market retailers are increasingly frustrated with the government, which is seen as corrupt and inept. “If the government doesn’t change its policy toward business, all the small store owners will be ruined,” Lapsia said, shaking his head.
As India battles with slowing growth, rising inflation and a weakened rupee, small businesses across the country are among the worst affected.
“The problems faced by all of corporate India get magnified for small traders and retailers,” said Saugata Bhattacharya, chief economist at Axis Bank. “When growth slows and prices are soaring, the discretionary income that people have to spend on consumer goods and services comes down drastically and people cut back on purchases.”
Najmuddin Fakhruddin Masalawala, owner at Hakimi Stores, which has been at Crawford Market for 35 years, said he has had to raise prices for his lentils, rice and other groceries sharply over the last two months, but sales are down 20 per cent. He said lentils, which previously sold for about 70 rupees per kilogram (2.2 pounds), are now Rs 90 per kg.
“When a working class person comes to the store, they ask why the prices have gone up so much that their bill that used to be 800 is now coming to 1,200,” he said. “What can we say to them? We are helpless. We have to raise our prices to survive.”
Even for those merchants whose goods are sourced locally, the rising cost of transportation from imported fuel is cutting into profit margins.
“Transport prices have increased by about 20 per”cent over the last three months,” said Harish Sethia, the owner at Jeet Traders, a wholesale merchant for grains, spices and dry fruit in Bhat Bazaar, a Mumbai neighbourhood known for its wholesale grain stores. He added that his sales were down about 25 per cent and that business has been sluggish for most merchants in Bhat Bazaar.
In Lohar Chawl, which is packed with home electronics and appliance retailers, stores were unusually empty on a weekday. At the Central Electric & Radio Company, which has been selling light fixtures for 56 years, a sign announcing a clearance sale failed to attract customers.
Three salesmen passed the time over cups of tea. One of them, Surendra Kumar, said sales were down almost 50 per cent over the last two months despite the store’s steep price cuts.
Next door, in a one-room office located in a dilapidated building, Sanjay Shah, partner at Siddhi Home Appliances, wrung his hands in worry. “Business is down, very down,” said Shah, a distributor for Prestige home appliances across over 40 stores in Mumbai. “People have lost their purchasing capacity. People do not have money for food and clothing, appliances are the last necessity.” Over the last quarter, Shah has seen about a 40 per cent drop in sales, compared to the same time last year.
“As a businessman, I only ask that the government make policies that allow the country to run smoothly,” said Shah. “But this government is not able to do even that. Something has to change.”
The Reserve Bank of India (RBI) Governor Raghuram Rajan has taken steps to roll back measures that were imposed when the rupee was in a free fall over the summer. On Monday, RBI cut a short-term lending rate for banks borrowing from the central bank, easing a cash crunch in the weeks before the Diwali holiday season.
But compounding India’s economic woes, industrial production slowed to a mere 0.6 per cent in August as compared to a year earlier, dampened by poor investment and consumer demand, India’s statistics ministry said Friday. The industrial production rate was an annual 2.75 per cent in July.
Capital goods production, a measure of investment, contracted 2 per cent in August from a year earlier, while consumer goods contracted 0.8 per cent.
“There is no easy fix to India’s woes in a growth environment where India’s potential output has also fallen,” said Bhattacharya. “You cannot boost consumption through stimulus measures because that will stoke inflation.”
India’s growth rate is expected to drop from the 9.3 per cent expansion recorded in 2011 to 5.3 per cent in the current fiscal year through March 2014, according to a forecast released by Prime Minister Manmohan Singh’s Economic Advisory Council on September 13, 2013.