By Bhogtoram Mawroh
Recently, there was a news item in the paper titled ‘Spectre of scanty footfall of Christmas shoppers in town,’ that reported on the fears of possibility of a downturn in business for the retail shops in the city. Business was already down in the preceding puja season, with the same story that some shops had to return as much as 30–50 % of their stock. In the story published ‘Shopkeepers cross about waning enthusiasm for puja shopping’ (ST October 12, 2023), one reason given for the fall in business was to the gradual migration of the main customer base, i.e., the non-tribal or non-indigenous population from the state. Contrary to popular wisdom on the street (the original version of WhatsApp University), there has been a constant decline in the non-tribal population in the state, which has fallen from 19.52% in 1971 to 13.85% in 2011. The latest census, when conducted, will most likely reveal the same trend. The blame this time around, i.e., the Christmas season, has been laid on the shifting consumer preferences towards sustainable and cost-effective fashion alternatives, from thrift shops and street vendors particularly among the youth,. This, it is believed, has taken away the business from the more established shops. It is also speculated that the rise of online shopping has had a negative impact on local businesses, as mentioned in both stories. Shillong is not only the capital but also the commercial hub of the state; it’s very much possible that the same trend can be seen in the rest of the state as well. Tura has also reported similar accounts. The important question is which factor is the most important and how the different factors mentioned are influencing each other.
In one of the stories published, a shopkeeper interviewed rejected the idea that internet shopping is a substitute for the in-person experience of handling, seeing, and purchasing goods, expressing the view that his clientele is different from that of ordinary internet buyers. Another shopkeeper agreed that those who prefer in-store shopping tend to visit on weekends and holidays, suggesting that the customer base is different. Thrift shops and street vendors (non-online shopping modes) are reported to be doing well, which does suggest that the rise in online shopping may not be the most important reason for explaining the reduction in business for the established shops. There seems to be something more at play here. In this regard, the story published on October 16, 2023, titled ‘Puja preparations begin in full force, markets rue lack of consumers’ about the low business during the Puja season in Tura, can be very illuminating.
The story reported that “the lack of handy liquid cash has also impacted sales… (with) most sections of the state, including the state government, the GHADC going through a major cash crunch, money has become hard to come by… the fact that they have less spending power has meant that business owners have less money to circulate through their business.” In short, the downturn in business can be attributed to the low purchasing power or availability of limited disposable income among consumers. People, therefore, are buying cheap stuff (online or from thrift shops and street vendors) not because they want to but because they have to. There appears to be some evidence that points towards this line of reasoning.
An important factor that determines an individual or family’s purchasing power (i.e., the availability of disposable income) is the prevailing inflation in the economy. Higher inflation lowers purchasing power, and vice versa. Over the last year, inflation has been a big issue for the country. There are two indices that are used to measure inflation in India: the consumer price index (CPI) and the wholesale price index (WPI). Measured on a monthly basis, CPI analyzes the retail inflation of goods and services in the economy, while WPI considers the change in prices at which consumers buy goods at a wholesale price or in bulk from factories, mandis, etc. The Reserve Bank of India has kept the target of keeping inflation at 4% within a tolerance range of +/-2% (i.e., within 2% to 6%). A look at the CPI rates since January 2023 shows that that ceiling has either been breached or was close to it on at least six occasions, i.e., more than half of the year. The highest was recorded in July, when retail inflation rose to 7.4%, which was the highest, compared to the preceding 15 months, i.e., stretching all the way to 2021. The rising cost of living has therefore severely impacted consumer spending.
One way to tackle the problem of inflation is to link wages with the rate of inflation—wages rise in proportion to an increase in inflation. In the organized sector, this is achieved through yearly increments, which ensure that real income (i.e., how much money an individual makes after accounting for inflation) does not decline over time. However, this is not the case in the unorganized sector, which does not have the facility of yearly increments. This is a very big problem since, according to the Union Ministry of Employment and Labour, workers in the unorganized sector constitute about 93% of the total work force in the country. It means that out of every 100 workers, 93 will be working without any protection against inflation. In the case of Meghalaya, this becomes very important for some specific reasons.
It is now well established that the culture of extortion, whether through illegal toll gates or from non-indigenous shopkeepers, is an epidemic that raises the price of commodities. This in turn pushes up the price of goods supplied to the rural markets as well. And now that the bridge over Umiam Dam will be under repair for the next four months, all vehicles coming to Shillong are diverted to Shillong By-Pass and VIP Road, Mawtawar. This will increase the cost of transportation which will be transferred to consumers, most of whom are already suffering from high inflation and already have limited disposable income. And if there’s extortion on the new routes or collection from non-indigenous shopkeepers, then the problem will be exacerbated. This will then have a very serious impact on the overall economy as well.
The purchasing power of consumers can be estimated by looking at private consumption, i.e., purchases made by consumers on items such as food, housing (rents), energy, clothing, health, leisure, education, communication, transport, as well as hotels and restaurant services. In India, private consumption accounted for 59.7% of its nominal GDP in June 2023, i.e., more than half of the GDP. This comprises consumers spending on goods and services produced in the country. This fact was brought home during 2020, when private consumption fell by -5.2% due to COVID-19 pandemic-related disruptions. Consequently India’s GDP also contracted by 6.6% in 2020–2021. What this means for Meghalaya is that, out of the Rs 46,600 crore GDP figures projected for 2023–24 (at current prices) by the Government of Meghalaya in its 2023–2024 Budget, almost 28,000 crore will have to come from private consumption. But if consumers do not improve their spending, the actual GDP figures could be much lower at the end of the financial year. The target of turning Meghalaya into a 10-billion dollar economy will mean increasing the purchasing power of the consumers in Meghalaya to the extent that they should have disposable income above and beyond 5 billion dollars to spend in the market. Is this possible? Or is it another jumla similar to one where every person in the country was supposed to get Rs 15 lakh in their account.
One way of ensuring that the purchasing power of consumers is increased is by creating decent jobs that can bring a fair income, provide security in the workplace, and provide social protection for the workers. These kinds of jobs are mostly found in the formal sector, with government employment being the most obvious candidate. However, Chief Minister Conrad K. Sangma has expressed concerns about the state government’s ability to provide employment opportunities for the growing number of youths entering the workforce each year. He gave the example of the Police Department, which is projected to have approximately 1,000 vacancies over the next five years, translating to around 200 posts per year. He looked at the private sector to absorb the remaining 59,000 out of the 60,000 individuals looking to join the workforce annually. Is the private sector strong enough to absorb more than 59,000 workers every year?
Let’s take the example of shopkeepers in the city. The only way they can absorb some of the job seekers (provided they want to work in the shops) is if they can reinvest their profits to expand the business. That way, they can hire more people and pay them decent wages. However, as things stand, they are facing losses that will compel them to do the reverse: cut down on the number of employees, reduce wages, or worse, close down the business. None of those are helpful. There is, though, one sector that has recently done well. But because of politics, its future is not looking good.
Recently, Parambir Singh Sehdeve, president of the Federation of Shillong Hotels, expressed his gratitude to the Meghalaya Government for organizing the three-day Cherry Blossom Festival, which resulted in almost 100 percent hotel occupancy. This was quite significant since the industry had been going through a long dry spell following the prolonged pandemic and the unfortunate incident at Mukroh last year, which led to the cancellation of the Cherry Blossom Festival. If this good business were to continue, it would mean more profit for the industry, which, if supported by proper policies, would mean more job creation in the industry. Those who get jobs then go the market and make purchases, which in turn raises the profits of the shopkeepers, provided they do not get extortion demands. They will reinvest the profit in the business, thus hiring more people, and the cycle continues. This is also very critical for those who are looking at self-employment. There’s a lot of talk about encouraging entrepreneurship for job creation. However, with very few consumers who’re going to buy the goods or services produced by the entrepreneurs how will it work? Belief in oneself and strong determination are not going to be enough to keep the enterprise afloat.
Demanding accountability for spending the money on festivals is good since the money spent actually comes from the taxpayers, i.e., you and me. However, when the criticism descends to calling for a case to be filed against a young woman for dancing in the festival in an attempt to target the Government, it is a clear case of ugly politics; not jobs or the economy, that is driving the criticism from some quarters.
Meghalaya is among the poorest states in the country. What economic policies the government enunciates and how the public responds to them by demanding accountability or creating roadblocks will determine whether we can ever get to live a decent life without constantly being worried about our future and those of our loved ones. For the politicians who are either already crorepatis or on the way to becoming one (just the monthly salary of an individual MLA will make him/her a crorepati even if they do nothing), they have nothing to worry about. But for us, it’s a matter of life and death. Hopefully, we take the economy as seriously as it takes us. If not, we are doomed.
(The views expressed in the article are those of the author and do not reflect in any way his affiliation to any organization or institution)