The economy problem

In India you will never be more than a few minutes walk from a general store. This is anything from a small hut to a unit sized shopfront, and sells a standard selection of prepackaged goods. The above is a perfect example, showing a typical pace of business. These are also known in Indian business circles as an example of an SME (Small and Medium Enterprises).

At first glance it is a rather convenient way to run things, you don't worry about having supplies as you will never be far from a shop selling branded goods. It is also, from my non-economic background, an example of so many Indian problems combined into one. So basically another misguided and ill-informed rant coming up.

To begin with there is no barrier to entry as the owner of a general store. I think the minimum requirement is a few planks of wood and 10 rupees to buy your first strip of goods. 'Strip' because the manufacturers provide the goods in a single continuous tear off strip of about 10 packages, for exactly these shops. This is where the problems begin, everyone can and has opened a general store. General stores open next to general stores, opposite general stores, in towns with almost as many general stores as people. (I remember hearing on my last trip that India has 1 business for every 7? people) The goods are almost always prepackaged, and identical. You will see the same selection of goods in each shop, if the largest doesn't have what you want, a few 7up or sprite variations aside, then none will. Note that there are variations, grocers who are also general stores, and medical stores which are also fancy stores.

The competition either does not occur to the owner, or is ignored because every Rupee earned buys food. The pace of business is consequently slow, especially at more remote locations that wait for a particular bus. The barrier to entry goes back even further, there are no wages. If it is your family that runs the shop the minimum threshold is enough food to eat, or if it is supplemental income then even less. The climate is such that there are no other real requirements, its warm enough to sleep with a sheet and people will sleep on the ground. Food is cheap, and firewood can be gathered. (I'm not sure quite how long until the environmental consequences of a densely populated country depending on firewood catch up). The forest department in this town seems to be concerned with firewood.

The smaller stores are sometimes poor, and their customers are poor. The consequence is the packages of goods get smaller. Enter the world of 18g bags of nuts, or 12g bags of pulses and so on. Perhaps a 20ml pack of toothpaste. This leads to two further problems, efficiency and waste. The efficiency is poor, the 18g nuts are more expensive per weight than in the UK, where nuts are sold in typically 100g-200g weights by supermarkets. To put this into perspective most food expenses are between 5 and 10 times cheaper than the UK. Everything is individually packaged, and in India that means another piece of plastic waste discarded somewhere in the countryside. This extends to cosmetics, a distinctly condom-like single serving packet of shampoo for example... perhaps Rs2. Even the standard sizes of water are too large, this is now sold in bags, which unlike the bottles are probably never recycled.

I'm not sure to what extent this is a trap, and to what extent this is necessary, its not like I'm an economist. I have now met some people for whom this is a side job for the wife looking after the children. As such its just a bit of extra cash and can be ignored. For others I wonder whether they see it as a way out of poverty, and how much they sink into stock and expanding their business. Either way I wouldn't call half the storekeepers employed

It's not just general stores, these were just the first to catch my attention. The next repeated store is 'medical shops', lowering the barrier to non prescription medications. In Hyderabad you might encounter furniture village, an entire section of the city dedicated to furniture shops. If you were going to open a furniture shop wouldn't you do it right next to the 100 other furniture shops. The quantity of stock is huge, which is useful because the staff will need somewhere to sit all day long. I have encountered the lowest 'pay' so far in India among the staff of these shops, one claimed about Rs50 per day (1 USD). (Livable standard salaries are Rs150 - Rs400 per day). You might wonder how so many furniture shops can each survive with the competition. The answer is that I saw very few listed prices - try and compare prices when you have to barter with each store in turn. How many could you possibly barter with. The answer can only be that each store has to charge more to account for the slow pace of business, and that bartering is part of the reason this remains so. Don't get me wrong, I've seen the flaws with an efficiency model. But I don't think this is the solution...