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Posted 21/10/2017 in Category 1

Indian Small Business Hit Hard as GST Shrinks Demand?

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Indian Small Business Hit Hard as GST Shrinks Demand?

With falling sales, workers in small-scale manufacturing units and small services businesses are facing an employment crisis, while those who have somehow managed to retain their jobs are facing salaray cuts!

Report from Jaipur:

The euphoria of the festival is clearly missing from the markets this year. During the peak sales time, when the shopkeepers are generally unable to manage the sudden spike in customers even with additional resources, today, even accosting passersby is not pushing up their sales.

Som Chatuvedi, 45, who owns a handicraft shop adjacent to Hawa Mahal, Jaipur, was considered to be more successful than his siblings after he switched to handicrafts, leaving aside their traditional scissors repairing business. Now, with shrinking income, he is forced to rethink his decision of venturing out alone.

“I don’t even need to explain my condition, it’s visible. Three days ahead of festival, I’m still waiting for a customer. It’s 2 pm and I haven’t sold anything yet,” he says. “Customers want to spend money only on the essential items. They are not even looking at our shops.”

To make a windfall during the Diwali season, Gopal Krishna Gupta, 46, who owns a garment shop, has now set up a firecracker shop for 15 days in Johari Bazar. With last few days of the festival remaining, Gupta has called two boys from his village expecting an increase in customers.

“It’s absolutely useless to expect from the market this year. Don’t know for how long we’ll have to stay in loss,” he says.

While people are avoiding making any purchases this Diwali, the few who are going to the market are simply not willing to buy any product at the higher prices.

“People haven’t accepted the GST (Good and Services Tax) yet. They want to purchase the products at a rate that is fixed in their minds, the earlier one,” he added.

Report from Delhi is same:

While the cash crunch and increased prices due to GST have led to a sharp decline in demand, repeated appeals of traders to the Centre have failed to evoke a response.

With Diwali peak , markets in and around Delhi look like they’re ready for festivities. But dig a little and you will find that traders, big and small businesses, are wary. Will customers actually turn up or, like every festival since demonetisation last year, will they have to make do with lower sales? Most sellers this Diwali insist that sales are just about 40% of what they were last year, and they are blaming both demonetisation and the shift to the Goods and Services Tax (GST) from July 1 for it.

Bhaiyya, bahut pareshani main hain (Brother, we are in deep trouble),” says Kaushalya Devi, whose family is in the pottery business. She sells her wares on a street in Indirapuram, Ghaziabad. “Log aa hi nahin rahe (People are just not coming),” she laments, adding that the situation being seen on Diwali is just a repetition of what was witnessed during Karwa Chauth and Navratri.

Her son, Satpal, explained that the family sells karwas during Karwa Chauth, handis during Navratri and diyas, Lakshmi and Ganesh statues and hathris during Diwali. “But the sales are down to just 40 paise in a rupee and we can’t fathom why,” he said with moist eyes.

What is troubling nearly all small sellers is that while they still have to bribe corporation staff and cops to sell their wares, the low sales mean that rather than taking home profits, it has become a matter of recovering the cost now.

A little distance away, Phool Mohammad, originally from Etah in Uttar Pradesh, who has set up a small shop selling Rangoli colours which he procures from Kanpur, looks equally dejected at the sales. But he still manages an occasional smile because his life does not depend on his Diwali sales. “I am basically a farmer and just come here for four-five days to make some extra money. But this time it looks unlikely that I will make any,” he says with a wry smile.

For many others too, Diwali is just about making a little extra. Bechan Chaudhary from Supaul district in Bihar has a paan shop back home and comes to Delhi around Navratri and stays here till Chhath, which comes six days after Diwali, to sell decorative items. “I usually used to make money equivalent to my three or four months’ earning during that period. But this time I am struggling to even break even,” he said.

The same is true even for traders of regular items like fruits. Sunil of Neelam Fruits said the sales have failed to take off following demonetisation. “We first thought it would be a small phase, but the customers have just vanished. Forget about big baskets of fruit we used to sell earlier, even the sales of loose fruit have dipped.”

Considering these sellers sell goods on which there is no GST and where cash is at play, the question is why then are the sales of even regular goods down.

Spending by business community has declined

Devinder Singh, owner of Roobsun Stores at Shipra Suncity, offered an explanation saying that the prime reason is that the business community has been deprived of its savings and earnings by demonetisation. “The salaries of people have only gone up, so what changed then? It is just that people who were in business are no longer sure about the future and are unwilling to spend much,” he said.

Singh, who has been in the trade for over three decades, said during Navratri, he experienced a strange phenomenon. “Halwa and chana are common items during Ashtami-Navmi and their preparation requires suji and black grams respectively. Last year I had sold 15 sacks of suji and eight of grams, this year the figure was down to just three and one respectively.”

As for Diwali, he said, the business community is buying fewer gifts. “Earlier they would buy for bank staff and business partners. With property sales and business down there are no favours to be taken by means of housing loans and the like and so the purchase of gifts has also gone down.”

Small traders suffering due to e-commerce

Some of the loss of customers is also due to the expanding e-commerce business. As Gurgaon-based e-tailer Ashish Arora, who runs a business-to-business enterprise, said: “With Flipkart, Amazon and Paytm regularly coming out with sales and tying up directly with manufacturers, people are finding better deals on these platforms. Similarly, sites like Bigbasket and Grofers have impacted grocery and vegetables and fruit sales.”

He believes the bigger impact of these e-commerce platforms has been on the sales of mobile phones and consumer durables, especially around festivals like Diwali. “With some of them tying up with big brands, the stockists, wholesalers and retailers have been completely eliminated. For example, Flipkart has tied up with VU and offering a 32 inch LED for less than Rs 12,000. How is anyone else supposed to compete on such sharp margins?”

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