The Untapped Potentials of India’s Street Vendor Economy - A Reality Check

When we venture out in the cities, we see a whole series of activities around us - a little girl selling flowers, an old man selling books, or a woman carrying freshly caught fish on her head. They are all street vendors, part of the huge parallel economy that has an impact on everyone’s lives.

India is one of the fastest-growing economies in the world, but the benefits have eluded many of its citizens. We don’t usually recognise street vendors as a formal industry, and usually, refer to them as an informal one. We usually take this small business for granted. But they contribute crores of rupees to the city and state economy.

Who are street vendors?

A street vendor is a very broad term. It refers to anybody selling goods on the street without a proper shop. Studies suggest that there are between six to ten million of them in India, and they comprise nearly 14% of the informal urban economy of the country. But only a few of them have licenses for selling.

There is a big debate on what role street vendors should play in the economy of India. Street vending has always been a way for poor people to make a living, like selling items like vegetables, fruit, or clothing and shoes. This entire infrastructure and framework which runs our lives daily is also a formal business.

This article will describe the crucial role played by the street vendors in the economy and what the government can do to integrate them.

1. Cheap price

Though there are big malls and supermarkets in all the major cities, most people still prefer to buy from street vendors. This is because, street vending is an ecosystem in itself, providing food and other items at affordable prices. Street vendors purchase goods at wholesale prices and make them available at the doorsteps of the middle and lower-middle classes. This helps to save time for these buyers that would have otherwise been lost, going to the market.

They are a boon to those who buy life’s necessities at affordable prices and in small quantities. For those of us who cannot afford to go to supermarkets, these vendors embody food security.

2. One vendor, many mouths to feed

Most street vendors are the sole earning members for their households, responsible for bringing food to the table and paying the school fees for their kids. A good source of income will save them and their family.

3. Interconnected with the formal economy

Street vendors have strong linkages with the formal economy, and many of them buy goods from the formal sector to resell. Many of their customers work in the formal sector. Those who buy and sell fresh food are an essential part of the urban supply chain. The street vending economy has a turnover of around Rs 80 crore a day.

4. Street vending-a good business model

We do a great injustice by calling street vendors marginalised because, in every business metric that you can think of, they exceed tier 1 companies. Let us take an example of a bookstore on a footpath. You can measure the per square footage revenue and return of investment of a street vendor’s stall. The investment in a street business exceeds by several times the return of investment for the malls.

Let us take another example, of a girl selling flowers. The flower that she is selling for Rs 10, had been bought for, say, Rs 7. So, she is earning a 30 per cent profit. This margin is much higher than most organised businesses.

Moreover, she has the flexibility of giving you discounts on the spot-something that salespeople at MNCs cannot do.

5. Helps in even distribution of wealth

The distribution of wealth in the informal sector is far more than in the formal sector. This happens due to the cutting down of operations costs. Suppose you eat a plate of idly from a vendor on a footpath, and he charges you twenty-five rupees. Of this, he would keep only six to seven rupees for himself; the rest will go to the people in the supply chain, like, the people who grind the dough, or those who wash the utensils.

If you eat this same plate of idly at a five-star hotel, it will cost you around five hundred rupees. The bulk of that money would be kept by the establishment, and a very minuscule percentage of that reaches the ecosystem.

6. Has lots of flexibility

The street businesses operate with a great deal of fluidity. Millions of street vendors can change their entire inventory, supply chain, target segmentation, pitch, and method of selling, every month. This translates to an overhaul, 12 times in a year. In contrast to this, large businesses would take anywhere between five to seven years to implement an organisational transformation.

7. Create jobs

Due to the pandemic, many people have lost their jobs. Hawking on the streets can be an opportunity for them to earn a livelihood. Though it will not make them rich, it will sustain them and provide cheap goods and services to other people.

Street vendors create jobs for others in the supply chain farmers and drivers. They represent around 4% of the total urban workforce.

8. Helps us to stay at home

Amid the lockdown, mobile street vendors are considered essential workers, and an important part of the food supply chain. For many locked-in residents, they are the only source of fresh fruits and vegetables. Those who sell prepared food, offer takeaways due to social distancing norms.

The role of the government

Street vendors face daily challenges to their economic livelihood. The biggest problem that they face in congested cities like Delhi or Mumbai is the lack of space.  Governments can dramatically improve the street vendor’s livelihoods, by improving infrastructure and providing sufficient space for vending. It can fully legalise street vending, and remove the need for licenses.

1. Use public spaces more efficiently

The Powers that be can think of an integration strategy like efficiently managing public spaces or proper mapping. Any urban intervention that involves spatial changes depends on maps. To properly account for street vendors the government can go for community-led enumerations that will collect data for a complete census.

Hawkers should not be allowed to sell near local businesses, since that will harm the latter. Facilitating mixed-use planning that allocates open public space to vendors can boost local economies, and encourage residents to shop. Inclusive and thoughtful urban design can play a key role in building connections between the citizens and the street vendors. Features like shady trees, low compound walls, and a wide footpath would benefit both the residents and the vendors.

2. Give monetary benefits

Recently the Government has launched a Rs 5000 crore special credit facility for street vendors hit by the Covid-19 lockdown. They can take a loan of Rs 10,000 for capital to revive their small business. However, instead of credit, the government can also give a one-time direct cash grant as livelihood support, to restart the economy.

3. Keep control of quality

The government should build a mechanism to authenticate or guarantee the quality of products sold on the streets. This would curb the menace of counterfeit products. For those selling cooked food, the health and hygiene department must conduct periodic checks and implement safety norms.

Street vendors are an important cog in the wheel of an urban economy. They are the ‘Unorganised India Inc” that creates millions of jobs for the unemployed youth. Street vendors play a major role in reducing the cost of living in urban cities, and we must all support them.

Also read:

1) The impact of Covid-19 on Small Businesses. How bad this has been?
2) How small businesses are coping during Covid-19?
3) Best COVID-19 Lessons For Small Business Sectors of India
4) How To Manage Investment During Covid-19 Pandemic?

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FAQs

Q. How can sidewalks be used to facilitate street vending?

Ans. The government can designate specific areas of the sidewalk as vending zones, and for other facilities like trees or signage. These multi-utility zones should give the customers proper access.

Q. Which cities have the most street vendors?

Ans. Metropolitan cities like Mumbai, Delhi, and Kolkata have got the highest concentration of street vendors.

Q. How can the government map the location of street vendors?

Ans. This can only be done if the government registers and gives licenses to all vendors. It should also keep a tab on any new street vendor setting up a stall.

Q. Are there any business opportunities for entrepreneurs in this sector?

Ans. Yes, you can create an app connecting, for instance, those who sell vegetables in an area. Buyers can place orders on this app, and get them delivered within a few hours.