Diwali might not bring Laxmi with it for many traders and businesses this time around , especially those hit by the Supreme Court’s order banning the sale of firecrackers in Delhi-NCR.
With the lingering effects of demonetisation and the introduction of the Goods and Services Tax (GST), retail and wholesale traders have taken a hit with the festive season not coming to their rescue.
The apex court’s order banning firecracker sales in Delhi-NCR has also left many traders in the city in a tough spot with unsold stock and the spectre of mounting losses they will have to absorb.
Business Standard looks at how the shopkeepers, store owners, traders, and businessmen are faring this festive season and what has brought down their spirits.
Demonetised Diwali for wholesale traders
Every year before Diwali, Prakash Maurya, an auto parts shop owner in southeast Delhi, and his wife would sit in an hour-long talk with his family to decide who should do what during their trip to Chandni Chowk and Sadar Bazaar, the capital’s two biggest wholesale markets.
However, things are different this year. Still unable to recover from the sting of last year’s demonetisation, Maurya has turned abstemious. “I am not spending even half of what we did last year on Diwali. I do not have much cash, because I lost a lot of customers,” he said.
Wholesale hubs across India are missing thousands of such customers. Many are complaining that the knock-on effects of demonetisation and now the GST have cut the flow of liquidity to the markets. Traders say sales this Diwali, which, they say are down to 60 per cent, would be the worst in the past five years.
Retail outlets miss the Diwali spark
The attendant at Sagar, a popular apparel retail store at Hill Road, Bandra, Mumbai, is looking wistfully at the sky. It is pouring outside on a cloudy Saturday and the attendant is well aware that this will hamper business during a crucial period for retail, namely, Diwali.
“I was counting on this weekend, which is the last before Diwali,” he says. “Business has been thin over the last few weeks and my bet was this weekend stretching over to the next. I am not happy how it has started out though,” he says.
Across the road at Reliance Trends, the fashion chain of Reliance Retail, the picture is no different. There are not many people milling around at the store, an oddity for a Saturday, which is otherwise considered a good day to shop. Sales executives admit they’ve been grappling with a lower shopper turnout through the festive period. They’re hoping the tide will turn during the Diwali week.
While pre-GST discounts across durables, fashion, and apparels have been a contributor to the sales pinch that many brick-and-mortar retailers are feeling now, looming large is a bigger problem: The lack of consumer sentiment and appetite at most durable, fashion and apparel retail outlets this festive season, exacerbated to some extent by demonetisation and GST. Many retailers, from the organised sector to traditional trade, across cities such as Mumbai, Delhi, and Kolkata, admit they did not expect the mood to be so sombre this festive season. Business is down, they say, with sales growth in the run-up to Diwali likely to be in the region of 5-10 per cent. Last year, most retailers logged a growth rate of 15-20 per cent in the equivalent period.
Thanks to GST, a dim Diwali for Dharavi’s small-scale biz
With Diwali around the corner, shops should be buzzing with customers and factories, small and big, should be humming with activity to produce goods. But the mood in the markets is sombre — this becomes clear in one of Mumbai’s busiest small-scale production centres.
Dharavi, Asia’s largest slum and home to countless small factories, has gone quiet, reported The Wire. The sewing machines have stopped humming and units that were previously busy, especially in festival times, are now silent.
Akbar Ali Abdullah, 48, who runs a garment production unit, explains why. At his rickety workshop at the corner of a narrow passage, the bespectacled Abdullah, hunched over, is meticulously carving jeans out of denim cloth. He does not require much convincing to spare a few minutes for an interview. “I could not have imagined spending time talking to someone with Diwali a few days away. But now I have time,” he says. “I have been in this trade for the past three decades. Never has the situation been so disastrous for business. Those who never ever borrowed money are now looking for credit. This Diwali is set to be forgettable.”
Sales take a 36% hit ahead of Diwali; traders blame GST
India’s retail sector has seen a major contraction ahead of Diwali, according to a NDTV report that surveyed heads of trader’s associations of 10 major cities across the country. (Read more here)
Viren Shah of Mumbai’s Federation of Retail Traders Welfare Association said that sales have dropped 50 per cent in the country’s biggest financial hub.
The corresponding figures for other cities present a bleak picture. Sales have reduced by 30 per cent in Ahmedabad, 15 per cent in Hyderabad, 30 per cent in Chennai, 40 per cent in Bangalore, 30 per cent in Bhopal, cumulatively adding up to a 36 per cent overall drop across the country.
The survey also asked respondents what they felt were the reasons and 100 per cent of them said GST was responsible. About a third also said that demonetisation’s impacts have lingered on and continue to affect trade.