BackEmpower street vendors to get India’s urban economy moving
Government policy attention and public patronage should combine forces to generate millions of roadside jobs in our cities
PremiumIn 1958, Mao Zedong argued that sparrows consume a lot of grains and ordered their extermination to make more grains available for the Chinese people. With sparrows exterminated, swarms of locusts infested Chinese fields, leading to the starvation death of 30–45 million Chinese citizens. Sparrows are to agricultural produce what street vendors are to urban economies. Most urban planners see street vendors as a nuisance, and they adopt a ‘tolerate, regulate and evict’ approach in dealing with them. Trying to eliminate street vendors, however, is a ‘Maopic’ approach to urban policymaking.
The urban sociological landscape comprises people across the economic spectrum. Mumbai, for example, is home to both Dharavi and Antilia. Between these two extremes lie the middle and lower-middle classes, who are engaged in the bulk of economic activities that drive cities. Given the low hourly wages and budget constraints of those belonging to these strata, and the labour supply and wage curves being backward-bending, members of these strata seek to make the rational choice of reducing their non-work hours to the extent possible so as to increase their work hours. By making goods and services available at doorsteps, or at places that are conveniently accessible, street vendors not only reduce the transaction costs of everyday purchases, but also play a significant role in increasing the labour hours of these strata. Therefore, street vendors have a major role in reducing the cost of living in urban cities. The street-vending economy also ensures equitable distribution of economic gains across its production and distribution value chains.
With urban planners focusing on building cityscapes that are attractive for investments, street vendors experience systemic and institutionalized contempt. This contempt is powered by a social group that does not directly depend on street vendors, but on an economic group of professionals such as drivers, maids and cooks, who in turn rely heavily on street vendors. But this dependent economic group does not have a voice that counts. The pandemic exacerbated the condition of street vendors, most of whom had to exhaust their savings to survive, with many forced to enter a steep debt cycle. The PM SVANidhi scheme of the Union government, under which street vendors are provided a micro-credit facility, is designed to enable them to jump-start their commercial activity. So far, 2 million vendors have availed of this credit facility, with 40% of the beneficiaries being women.
But traditionally, street vendors have remained a neglected lot, and have been subject to harassment by police and local governments. India’s first legal recognition of street vending as a profession was accorded under the Street Vendors Act, 2014. However, ground level implementation of this law has remained patchy. As a result, there is very little institutionalized support that street vendors could get, resulting in a market failure that needed to be addressed through government intervention. Through a credit guarantee measure linked to the PM SVANidhi scheme, the government is covering the risk of loan defaults faced by lending institutions. This has resulted in banks coming forward to lend money to street vendors, who’ve traditionally borrowed from the unorganized sector at exorbitant rates of interest. But addressing that market failure on credit availability is just the first step in empowering India’s urban street vendors.
The idea of street vending extends beyond its traditional definition, however. Seen from a wider perspective, it opens up new vistas of economic activity; it’s a form of micro-entrepreneurship that can address the unemployment challenge confronting India. Therefore, their role, needs and strengths must be factored into every aspect of urban development planning. The biggest thrust in favour of street vendors, though, would come not from the government, but from strong and conscious public patronage. In the 1970s, food trucks in the US, largely run by poor Americans, started receiving strong public patronage. As a result, these trucks managed to compete well with regular dine-in restaurants and created a niche for themselves. Today, food trucks dominate the US below-$10 breakfast and lunch market segment. According to the US government census, sales from food trucks increased 79% between 2012 and 2017. In 2018, mobile food service businesses reported an average annual payroll of $20,872 per employee, compared to $19,777 for all legal forms of organization. None of this would have been possible without the kind of patronage that pushes truck owners to innovate constantly and offer better value to their customers. Indian street vendors also need robust public patronage for them to achieve their full potential. Such patronage would build a strong business case for their growth and help eliminate the market failures that mark the country’s street-vending landscape.
In order to tighten its control of China’s urban life, the Chinese Communist Party had been clamping down on street vendors. But the covid outbreak and subsequent unemployment levels caused a policy reversal in China, with Premier Li Keqiang leading from the front. This policy shift is backed by a successful experiment in Chengdu, where pro-street vendor policies created 100,000 jobs and increased interest in micro-entrepreneurship. It is estimated that 50 million jobs could be created by the promotion of China’s street vending economy. Likewise, with the right government policies and public patronage, Indian street vendors can become key enablers of economic growth and employment across urban landscapes.
Prasanna Karthik is a governance strategy and public policy professional. These are the author's personal view.
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