ROLE OF PETTY TRADERS

Trade is an art. This is what comes to one's mind, when one

strolls through the streets of a city. One sees on both sides of the road, different items,

so well and artistically arranged for catering to the basic requirements of common people

at outlets convenient to the consumers at right times, at right places, at right prices and

in right quantities. The people behind these activities are none other than the petty

traders. Thus petty trading activity has become an important sphere of informal sector

(IS) which plays a significant role in urban economic life.

Petty traders are highly indispensable in the distribution system

providing useful servlces to the community especially the lower middle class and the

poor. There are certain commodities which are not capable of being sold to ultimate

consumers by the formal sector (FS) such as fruits, vegetables, pan - beedi - cigarettes

etc., and the services of 'IS' are called for. Petty traden have access to a large section

of the urban commun~ty and do a very useful service to it at low cost of operation. They

also make a good contribution to cultural life by selling newspapers and magazines at

convenient locations.

Urbanites invariably have annoyance and irritation at the roadside petty

traders because of their encroachment on public property, without realizing the basic

fact that they heavily depend on them for several basic needs. Urbanites very often

treat these petty traders as second-class citizens and they are usually considered illegal

and causing nuisance. But the fact remains that these road-side petty traders are

interwoven in our lives in the cities and towns and hence we cannot afford to ignore

them.

For those of us who regularly travel by cars and not by public transport

system, live in decent apartments and not in unauthorised slums, consider the

roadside petty traders as illegal encroachments and also comment that the government

is not doing anything to demolish such encroachments. As for the petty traders, a

street, a beach, a park, a railwaylbus station has a different meaning as a means of

eking out their daily bread.

In most developing countries, 'National Development Strategies' which

are precisely bureaucratic models of development, concentrate on agricultural production

at one end of the development spectrum and urban -based industrialisation at the other.

Between them are sandwiched the small scale 'IS' workers. These unsubsidized workers

have contributed significantly to keeping national economies afloat while subsidized

industry and the 'FS' stagnate and in some cases collapse around them. Thus as the

failure of the prevailing bureaucratic model of development became clear, a new attitude

towards informal workers and their potential role in development began to appear. The

role of petty traders can therefore be analysed in terms of their contribution to society.

6.1 EMPLOYMENT

It is ~ndeed a truism to refer to the 'IS' as a provider of jobs to the jobless.

Studies and researches carried out by national and international agencies on

the subject of 'IS', have brought out the fact that this sector in the developing

world provides employment to large numbers of predominantly poor people. The

researches in this field have also emphasised that petty trading activities is one

of the main sources of urban 'IS' employment generation. The essence of 'IS' is

that the individuals create jobs for themselves ratherthan remain unemployed.

One may also add that a petty trader in the urban informal sector (UIS) not only

creates job for himself, but he also provides employment although in a limited

way to his family members either directly or indirectly. These activities are

undertaken in the absence of any other source of earning a livelihood.

'IS' has a great potential for employment generation. It employs about

65% of the workforce outside agriculture and ranks next to agriculture in terms

of size of employment.' In the Indian context 'UIS' has exhibited a high rate of

growth of employment of about 6% per annum as against the overall

employement annual growth of about 2%.2

A study conducted by the Institute of Applied Manpower Research

(IAMR) on 'IS' has amply demonstrated that employment generation through 'IS'

offers the least cost policy options in employment policy formulation. This study

also points out that trade and service activities are emerging as the main actors

of employment generation. The income of the workers in this segment of the

'IS' depends crucially on the trade shares appropriated through their own efforts.

Thus, it appears that the route to development of 'UIS' in future is through trade.

It is easier to get into trading activities as a petty trader in the 'UIS' as investment

and skill requirements are low and income per unit is higher among trading

units. The risk element is also low. After gaining confidence in petty trading

activities, better financial status and a feel for the market through trading, the

petty trader could then branch off to processing some of the goods he has been

trading in

'IS' establ~shments have a potential to absorb rural migrants. Migrant

workers account for 51 . I % (Table 4.1.2) and majority of the migrants in the

study area have orginated from the rural areas (Table 4.1.3). A good proportion

of rural to urban migrants drift to the 'UIS' either because 'FS' jobs are not

available or self-employment provides a more natural and desirable prolongation

of rural life than employment in the 'FS'. The proliferation of certain petty trading

1 Ahluwalia. S .S (1995): "Employment promotion in the Urban Informal Sector", Inaugural Speech. Notional

Seminar, on t(mployment Promotion in the Urban lnformal Sector, Dec: 14-15, 1995.

2 lhid

activities such as fruits and vegetables selling, requiring little capital or skill can

be considered as the direct outcome of migration from rural to urban areas.

While seeking first employment, a migrant worker does not differentiate

significantly between different urban informal activities. It is only after gaining

some experience that a migrant worker prefers to rely on certain informal activities

for employment.

Street trading appears to be one of the entry points for migrants into the

working life of the city. This gives foothold in the labour market to the fresh

entrants, so that they can asess their prospects in the labour market and branch

off to activities depending on their education , skill and aptitude. Street trading

seen often as the selling of fruits, vegetables and prepared food seem to be

some of the major occupations of 'UIS' in Kerala.

Female participation in the urban informal trade sector appears to be

very low in Kerala. In the study area, this sector is dominated by males (94.7%)

and female participation is negligible (See Table 4.2.2). These family participants

can be termed as 'Secondary Workers' meaning that they are not the main

bread winners of their respective families. Many of them have been forced into

these activities out of a dire need to supplement family income.

However, apparently women may not be employed in significant

numbers in this particular sector. But there is every possibility that women

employment is hidden in the form of preparatory activities undertaken at the

residences of the petty traders such as cooking the food items sold, cleaning

and sorting the vegetables and fruits vended and maintenance of milch-cattle

and other related operations. Petty trading activities in the 'UIS' thus provide

substantial scope for employing female workers indirectly.

It would be interesting to know at this stage the motives for seeking

employment in this sector. These motives mainly depend upon the socio-

economic background and aptitude of the participants in this sector. The major

reasons why employment in this segment of the urban economy has been

growing at a rapid pace are:

- it offers fairly good remuneration to its participants who are mostly

unemployed before entering in this sector.

it demands no significant education and experience: In fact illiterates

and totally inexperienced can also take up a petty trading activity in the

'UIS'

- there is neither age bar nor bar with regard to residental status to enter

this articular sector.

Above all it enables the participants, especially the migrants to secure

some means of livelihood in the metropolis which could provide them with a

reasonable level of earnings sufficient to sustain themselves and their families.

One should therefore expect that the earnings of the sampled petty traders should

be adequate enough to afford them and their families a reasonable standard of

living. It would therefore be of interest to know at this stage the amount of

incomelearnings generated by the sampled petty traders while engaging

themselves in various petty trading activities. Our discussion naturally turns

toward that direction.

6.2 INCOME I EARNINGS

Data on incomelearnings has been very difficult to obtain as the petty

trading units in the 'UIS' do not maintain any balance sheets and they are

mostly observed to be keeping themselves hidden from official records for

various reasons.

Earnings are obtained by deducting all the expenses from the value of

sales. This IS same as that of gross profit. 'Net Earnings' is defined as the

actual income that is generated in the process of undertaking any productive

activity. This is obtained by deducting all the expenses from the value of sales.

The survey gathered information on earnings of petty traders by asking

them what they considered as their usual net earnings after deducting all the

paid expenses. Needless to say that these figures include not only return to

the petty trader's own labour, but also that of other members of the family

indirectly participating in the activity on an unpaid basis and return to capital

owned. Therefore the earnings of the petty traders also include implicit costs.

It is ~ndeed a truism to state that no business can run without reasonable

profit for a long time. A petty trading activity, however small it may be, can be

considered as a business in every sense of the term. Hence a reasonable

return on sale is necessary to keep the business alive and run it in the long run.

An attempt is therefore made to find out the earnings of the petty traders in the

study area whose very survival depends on the margin of profit earned by them.

It may be noted that the chances of income figures to be slightly under reported

by the sampled petty traders are very high. The findings of the survey about

the earnings of the petty traders in the study area has been presented in table

6.2.1.

152

Table 6.2.1: Net daily earnings of petty traders in the study area

Source Survey data

SI. No. - 1.

2.

3.

4.

5.

6.

*

Note: Figures fn Parentheses show the percentages

From the above table, it is reported that for over half of all the sampled

respondents, (54.3%) the net daily earnings range between Rs.101 to 150. Out

of the total 337 respondents, only 12 respondents (3.6%) get a net daily earnings

of above Rs. 251. Those earning below Rs. 100 are reported to be 16.6% and

16.3% earn in the range of Rs. 151 to Rs. 200.

Activity

Petty Kada

Thattukada

Eatables

Consumer Nondurables

Consumer Durables

'Others

Total

An activity wise classification shows that in all trading activities except

in Thattukada and 'Others' category, majority of the petty traders are earning in

the range of Rs. 101 to 151. In Thattukada category, 95.6% of the petty traders

are reported to have earnings above Rs.201 showing a relatively higher earning

Below 100

2 (5.6)

(-)

2 1 (20.0)

9 (9.4)

5 (13.5)

19 (46.34)

56 (16.6)

101- 150

24 (66.6)

- (-)

54 (51.4)

64 (67.4)

25 (67.6)

16 (39.02)

183 (54.3)

Total

36 (100)

23 (100)

105 (100)

95 (1 00)

37 (1 00)

41 (100)

337 (100)

151- 200

7 (19.4)

1 (4.4)

21 (20.0)

15 (15.8)

7 (18.9)

4 (9.76)

55 (16.3)

201- 250

2 (5.6)

11 (47.8)

9 (8.6)

7 (7.4)

- (-)

2 (4.88)

31 (9.2)

251 &Above

1 (2.8)

11 (47.8)

- (-)

- (-)

- (-)

(-)

12 (3.6)

potential of this group as compared to the other trade groups. In 'Others' category

46.34% of the petty traders are reported to earn upto a maximum of Rs.100

only per day, showing a relatively lower earning potential of this group as

compared with other trade groups. However, the average daily net earnings of

different category of petty traders are different from one another and this is

shown in the following table.

Table 6.2.2: Average net earnings, standard deviation and co-efficient of variation across activities

Source : Survey data

Non-durables

The above table reveals that the average earnings of a sampled petty

trader in Rs. 147.61 with SD 54.96 and CV 37.23. However, there are variations

in the level of earnings across activities. The key variable of the variations in

earnings appears to be the type of activities undertaken by the sampled petty

traders.

Total

The average daily earnings of the Pettykada workers comes to

Rs. 159.02. It is Rs. 264.13 forthe Thattukada workers. Rs.139.95 forthe petty

147.61 54.96 37.23 337

traders who deal in eatables, Rs. 141.10 for Consumer Non-durables group,

Rs. 136.62 for Consumer Durables and Rs. 116.83 for 'Others'. Hence,

variations in earnings are observed across activities.

Chart 6.1

Average Net Earnings of the Sampled Petty Traders MO I

Pettykade Thsttukada Eatables Consumer Consumer 'Others' Non-durables Durables

The variations in earnings are mainly due to the nature of goods sold in

these petty trading units. For example, in Peftykada activity, most of the goods

sold, like tobacco, matches and confectioneries, have fixed margins. The recent

Kerala High Court's verdict banning smoking at public places have affected the

earnings of the Pettykada workers heavily. According to P. A. Abdulla, Joint

Secretary, Kerala Cherukita Vyapari Association, the daily turnover in the 1000 - odd bunks in the Cochin Corporation itself, has nosedived by over 25%, affecting

the livelihood of thousand^.^ If it is a mouthful of puff that has been denied to the

smoker, it is the livelihood that has ben denied to these street vendors.

3. The New Indian hpmss. Kochi. "Shopkeepers flay smoking ban." Saturday, July 24, 1999, p.6

Sector-wise scenario reveals that, the average net daily earnings is the

highest in Thattukada units. In these units, they sell different delicious home-

made food art~cles, for which they charge a moderate price. The largest single

item sold in a Thattukada is Omlets with 'Puttu'or 'ldiappam'for which they get

a good margin

But it is to be noted that at least five people are engaged in a Thattukada

activity and for these people this is the only source of livelihood. More than any

other informal trade activity, family labour, contributing both as full-time paid and

unpaid workers and also as part-time workers are more in Thattukada operations.

Children from within and outside the family are also employed. There is heavy

under reporting of female labour especially from within the family. For the

members of the family as well as others engaged in a Thattukada operation, the

duration of the work is round the clock. When we look into all these aspects,

even a Thattukada worker's earning is too meagre. Moreover, since most of

the Thattukada activities are concentrated in important centres like bus stand

and railway station and that too during night hours, they seem to be of immense

help to those passengers who reach the city at odd hours.

6.3 EARNINGS AND MOBILITY

Occupational mobility is considered as a movement between

occupations during the life of an individual. In the previous chapter we have

already spelt fundamental differences between occupational mobility and certain

similar terms With regard to occupational mobility, there are two important

classifications : viz; vertical and horizontal mobility. Vertical occupational mobility

is defined as a "movement in the same or closely related occupations by ascent

or descent". A movement from lower level to middle or higher level occupation

and vice versa is vertical mobility. The former is vertical upward mobility and

latter is vertical downward mobility. Horizontal occupational mobility is a

movement between occupations and hence it is termed as inter-occupational

mobility.

In general, people tend to shift from one activity to another which is

more or less in the same line so as to optimise the experience gained by

them in the previous activity or activities. Inadequate profits in the earlier activity

or expectation of higher profits in the proposed new activity in the same or

similar line were some of the reasons cited by the sampled petty traders for the

change of activity.

It is not merely the current level of income that offers hope to the petty

traders; prospects for the future also are perceived as good. This does not

seem to be a wishful thinking, since there is evidence of occupational mobility

within the urban informal trade sector. For example, some of the petty traders

dealing in ready-made garments had their previous experience in various textile

shops. The entry point to most of the migrants in the 'UIS' is through various

hotels and restuarants, because food and shelter, which are considered highly

expensive in urban areas are provided to them free of cost. Hence hotels and

restuarants serve as a "parking lot" to most of the migrants who come to the

city in search of a job in the urban areas.

One of the hypotheses developed in this study is that successful petty

traders are those with upward activity shifts. Before, we analyse this hypothesis,

let us first identify who the successful petty traders are. Martin. Patri~k,~using the

criterion of monthly earnings has identified successful petty traders as those with

a monthly income of above the average income. Some evidences on upward

mobility within the urban informal trade sector is found in the income profile of the

self-employed petty traders from theirjob histories. This shows a steady increase

in income as they shift from one job to the next. In order to substantiate this, a

4. Martin, Patrick (1996) : 'Tirban Informal Sector: Entrepreneurship, self-employment and Linkage', Unpublished Ph.D. Thesis. Dcpartment o f Applied Economics - Cusat.

summary of earnings of the sampled petty traders by levels of activity shifts is given

below

Table 6.3.1 Summaries of earnings of petty traders by levels of activity shifts

Source: Survey Data

Activity Shifts

No shift

Once

Twice

Thr~ce

Above three times

For entire population

Table 6.3.1 indicates that there is a marked increase in the eamings of the

sampled petty traders as they move on shifting from one activity to another. The

table also reveals that although the overall average income of the sampled petty

traders is Rs. 147.61, it is much less (Rs. 99.56) in the case of those petty traders

who have not made any shifts in their trading activities. On the other hand, those

petty traders who have made more than three shifts between different informal

activities, are earning much more (Rs. 200.00) than the overall average eamings.

Hence, the hypothesis that successful petty traders are those with upward activity

shifts holds good at,least in the geographical area of the study. It comes as no

surprise therefore that participants in the urban informal trade sector are not regarded

Mean

99.56

153.16

158.77

164.19

200.00

147.61

S D

59.73

52.37

41.48

53.39

35.36

54.96

No. of cases

57

125

110

43

2

337

CV

59.99

34.19

26.13

32.52

17.68

37.23

by most people as a temporary condition before they are able to find employment in

the 'FS'. On the other hand, petty trading is more a way of life, especially to the

participants in the 'UIS' as it provides them liveliness and livelihood, however meagre

it may be.

Capltal is the life-blood of any business. Petty trading being a business

and a way of life to many of its participants, the level of income I earnings depends

to a certain extent on the amount of capital invested in it. Let us now therefore,

discuss the capital requirements of the sampled petty traders.

6.4 CAPITAL REQUIREMENTS

The capital requirements of the petty traders can be both for permanent

investment and for current or short term investment. Permanent investment is

also known as fixed capital and working capital is the other name for current or

short term investment. Generally, the fixed capital requirements are met by the

petty traders themselves, engaged in various petty trading activities and working

capital is raised through various credit arrangements.

How much do the roadside vendors and other similarly placed self-

employed people engaged in various marketing activities have to invest on their

capital requirements if any and I or on day-today purchases of materials for direct

sale to customers? The types and scale of activities undertaken by the sampled

petty traders are such that they did not really involve investment of any significant

order on tools and equipment or any other capital item, and certainly not on premises.

Majority of the petty trading units are operating on the encroached foot-path platforms

and streets. Therefore the question of owning the premises does not arise at all for

the sampled petty traders. Some of the sampled petty traders do have a temporary

structure to carry on the marketing activities. This is either in the form of an asbestos

tent or a rexln tent. The main source of power to these temporary premises is the

street-light and the power used by the'FS' establishments. Since the petty traders

are poor and in search of some job fortheir livelihood, they often resort to hawking

and vending with their meagre resources. Due to the lack of investment resources

and low capacity to store, majority of the petty trading units are in a position to buy

their inputs in quantities sufficient only to a day's operation forthe purpose of sale.

A few trading activities like Pettykada and Thattukada do require some initial fixed

type of investment, but by and large, most other activities do not involve any fixed

investment except on acquiring a wheeled I unwheeled (mostly wooden), improvised

kiosk type structure / container I tricycle for keeping their wares. Some even hire

them at a cost of Rs. 15 to 25. Of late, we also see some petty traders using

rented goods carrier, autorickshaws for keeping their wares, especially fruits, to be

sold to the consumers. This is mainly to escape from the police harassments.

The vendors and their likes keep standing by the side of their little equipment while

preparing food items or performing other marketing activities.

Thus, we find that as far as the petty traders are concerned, fixed capital

has very little role to play compared to working capital. Moreover, the petty traders

often fail to identify the difference between their fixed and working capital, and

therefore, the total capital base of the sampled petty traders has been studied. The

following table gives an account of the total capital employed by the petty traders in

the geographical area of the study.

Table 6.4.1: Amount of capital invested by the petty traders in the entire study area

Source: Survey data.

SI.

No.

1.

2.

3.

4.

5.

6.

.

Note: Figures ~n the parentheses show the percentages.

The table shows that, among the activities surveyed, 12.2% of the sampled

petty traders reported having invested more than Rs. 15,000 and a small segment

of them run their business with a meagre capital of just Rs. 500 or less. Out of 337

sampled petty traders, the highest number of 95 (28.2%) reported having invested

upto Rs. 5.000 or less. A good number of petty traders (58) (17.2%) reported

having invested upto Rs. 10,000 or less. These petty traders were engaged in

almost all types of activities.

A~tlvlly

Pettykada

Thattukada

Eatables

Consumer Non-durables

Consumer Durables

'Others

Total

A sector-wise scenario shows that the highest amount of capital is invested

both in Pettykada and Thattukada activities and the lowest in 'Others' category. For

example, whereas all Pettykada and Thattukada workers have reported having

Upto

Rs.500

- (-)

(-)

6 (5.7)

6 (6.3)

2 (5.4)

17 (41.5)

31 (9.2)

501

to 1000

- (-)

- (-)

19 (18.1)

14 (14.8)

3 (8.1)

11 (26.8)

47 (13.9)

1001

to 5000

- ( -

( -

39 (37.1)

33 (34.7)

12 (32.5)

11 (26.8)

95 (28.2)

5001

lo 10000

6 (16.7)

10 (43.5)

21 (20.0)

14 (14.8)

5 (13.5)

2 (4.9)

58 (17.2)

10,000

o 15.000

26 (72.2)

8 (34.8)

15 (14.3)

10 (10.5)

6 (16.2)

(-)

65 (19.3)

15.001

(L above

4 (11.1)

5 (21.7)

5 (4.8)

18 (18.9)

9 (24.3)

- ( )

41 (12.2)

Total

36 (100)

23 (100)

105 (100)

95 (100)

37 (100)

41 (100)

337 (100)

invested more than Rs. 5,000, in 'Others' category, the amount invested is below

Rs. 5,000 for 95.1 % of the sampled petty traders. Moreover, there exists wide

variation in capital invested by these petty traders. This is supported by the average

capital invested by them.

Table 6.4.2: Average amount of Capital Invested, Standard Deviation and Coefficient of Variation across activities

Source: Survey data.

SI. No.

I.

2.

3.

4.

5.

6.

The table reveals that the average capital invested by all the sampled

petty traders taken together comes to Rs. 7,222.48. But as we see from the

table, there are variations across activities. The average amount of capital invested

in both Pettykada and Thattukada are relatively high, when compared with the

capital invested in other surveyed activities. The average capital invested in

Pettykada and Thattukada activities is Rs. 12,444.44 and Rs. 12.565.22

respectively. The main reason is thatthe amount invested in fixed capital in these

Activity

Pettykada

Thattukada

Eatables

Consumer Non-durables

Consumer Durables

'Others'

Overall

Mean

12444.44

11565.21

5994.76

7197.37

9294.59

1533.54

7222.48

S D

3018.46

3418.88

5044.14

6074.50

6565.90

1755.70

5831.35

No. of cases

36

23

105

95

37

41

337

CV

24.26

29.56

84.14

84.40

70.64

11 4.49

80.74

activities is much more than the working capital. For example, a petty shopkeeper

has to spent on an average of five to six thousand rupees in order to make a

bunkshop. A Thaftukada worker has to spend more in fixed capital than working

capital in acquiring certain cooking equipment, utensils, containers and the like to

carry on the trading activities. For the rest of the activities, since most of the petty

traders are operating from the encroached and open areas, the working capital

requirements are more than the fixed capital. For example, in 'Others' category,

the average amount of capital invested is only Rs. 1533.54. Thus the petty traders

in our study area seem to function with a relatively low level of capital. This gives

the impression that the petty traders are not in a better financial background. They

are often constrained by poor capital base. They often face financial constraints for

meeting the day-to-day expenses on their activities. Thus the units are not in a

position to expand and 1 or diversify their activities on their own.

Chart 6.2

Average Amount of Capital Invested by the

'- 1 1 12444.44

Sampled Petty Traders

Pettykada Thettukede Eatablea Consumer Consumer 'Others' Non-durablea Durable8

One of the hypotheses developed in the first chapter is that earnings of

petty traders are largely influenced by capital which is low. We have seen that the

capital base of the surveyed petty traders are very poor. Most of the units are

operating on a day-today basis because they have to rely on theirown sources to

finance their operations. Also, income earned from each of the unit on an average

is also not high and does not permit ploughing back of earnings to finance the capital

requirements. This prevents them from expanding I or diversifying their present

level of activities.

The petty traders in the 'UIS' start with a low capital base, which leads to a

low volume of trade, which in turn leads to low earnings and low savings. Low

savings are mainly because of their basic needs. It is true that from the surplus

generated, the individual has to remove money for the expenditure on himself as

well as his family and in this vicious circle while he works , he is not able to grow by

expanding the capital base. Thus the hypothesis that the earnings of the petty

traders are influenced by capital which is low holds goods in the geographical area

of our study. Possibly, low level of investments required in fixed and working capital,

and low risk element coupled with a reasonable income may have attracted people

in large numbers to petty trading.

6.5 LINKAGE AND PETTY TRADING

Technically, the word 'linkage' means interdependence among different

sectors. The 'UIS' is not an independent and exclusive sector. It is believed to be

linked to the 'FS' and the rest of the economy through a variety of linkages. It would

therefore be worthwhile to identify the nature of linkages between the formal and

informal sector or among the different economic activities in the urban economy.

These linkages may at the very basiclevel be classified into direct and indirect.

The direct linkages may be in terms of resource inputs from formal to

informal sector or technology and market linkages, (Bose 1978; Scott 1 979).5 These

linkages are often highly exploitative in character. According to Bose, the 'IS' units

perform two basic functions. First they produce and deal mainly in cheap goods

for the urban poor, who are finding it extremely difficult to purchase the high-cost

standard industrial goods. This is based on the low wages in this sector. The

second function, also based on the same reason, is to provide the larger units with

huge trading profits through an unequal exchange relationship. Thus, the poor in

the 'UIS' operate in a separate, often small and individualised market both for resource

inputs and outputs which is highly unfavourable to them, the gains being appropriated

by the large units. This is because of high input cost and low output price. Moreover,

it may be concluded that, though the petty traders in the 'UIS' provided a significant

part of the goods and services in the urban economy, in a way which makes it

accessible to persons who can neither buy in large quantities nortransport for long

distances, and provided employment to a sizeable section of the urban labour force,

its growth depends mainly on the fortunes of the urban 'FS'.

The ~ndirect linkages refer to those generated by the goods and services

produced in the 'IS' for a clientele whose income isdependent upon the 'FS'. Thus

the magnitude of various petty trading activities and repair services are dependent

upon the income of a clientele who in turn is dependent upon the 'FS' activities for

their livelihood. It means that only a growth in the formal sector's productivity and

wages will create additional demand forthese activities. However, here a paradoxical

relationship ar~sing out of the demonstration effect of the 'FS' goods is likely to arise

between the 'IS' goods and 'FS' wages. This growth would worsen the income

distribution and induce a shift in the pattern of demand away from the informal

sector's products.

5 Bose, A.N (1978) . "( aiculla ond Rural Bengal: Snlall Sector Symbioses", Minerva, Calcutta.

Scott, A.M (1979): "Occupational Careers and Economic Strategies of the working class of Lima", Abstract in Development Research Digest, No. 1 Spring, IDS

It has been noticed that majority of the sampled petty traders operated

from a particular location mostly public places, legally or otherwise such as vicinity

of bus stand, railway station and market yards; footpaths in densely populated areas

and around institutions having public dealings such as educational institutions,

hospitals, cinema houses and government offices because of strong forward and

backward linkages. As for forward linkages, petty traders sold their goods and

services mostly to individual consumers and households. Hence, the compulsion

to operate from concentration of their customers. Besides, because of the poor

economic background, the petty traders, tend to buy their inputs in small quantities

from the nearby retailers 1 wholesalers as and when required. Proximity to their

sources of inputs - the backward linkages - has therefore been a necessity. Thus

the possibility of growth of the informal trade sector depends on the nature and

types of linkages that are operating in reality.

The linkages, whether it is backward or forward are of different types such

as technological, production, financial and consumption linkages. As far as the

trade sector is concerned there seem to be more of consumption linkages because,

these units have direct links with the final consumers, mostly households. The

goods sold by the petty traders may be bought by households, dependent on the

'IS' itself for their income; or alternatively, the output may be destined also for

households whose incomes are derived mainly from the government and modern

private sectors

Thus the relationship between formal and informal sector units could be

direct or indirect, backward or forward; it could however be exploitative as well.

There are different lines of thought in this area. One school believes that 'IS' is an

autonomous segment of the economy dealing mainly for consumption within this

sector itself, so that various sub-sectors of the 'IS are inter-related. The petty

commodity production school argues that the 'IS' has a dependant relationship and

is exploited by the 'FS'. What the 'IS' does is to assure high profits to the 'FS',

through the provision of cheap labour and other goods and services at a very low

price. A third view is that the 'IS' is integrated with the rest of the economy through

complementary linkages. Hence, whatever be the views, the fact remains, that the

'IS' is in no way an independent and exclusive circuit. It is linked to the 'FS' and the

rest of the economy through a variety of linkages.

6.6 PETTY TRADING AND SELF- EMPLOYMENT

A petty trader is an 'IS' worker who is self-employed. Several studies on

'UIS' have categorically stated that it is a sector comprising self-employed categories.

But all the self-employed people do not come underthe purview of 'IS'. Forexample,

certain self-employed units like a clinic run by a doctor himself and other self-

employed professionals like lawyers and engineers etc. are generally excluded from

the ambit of the 'IS'.

For understanding the nature of self-employment in India, an international

context may be relevant. Whereas in certain developed countries, like U.K and

Germany self-employment is concentrated in certain selective occupations like

literacy, artistic and sports, managerial, construction or agriculture, in developing

countries like India, self-employment is largely a phenomenon of four sectors; viz.

construction, hotels and distribution, financial services and other services. This

category also ~ncludes a lot of petty traders.

Self-employment is a private phenomenon. In a market economy, as the

capitalistic mode of production advances some of the traditional craftsmen and

artisans are forced to sell wage labour, whereas, others are weeded out of the very

productive system itself. Technological advances coupled with state policies fuels

this process. The ultimate effect is self-ernpl~yment.~ In fact lack of alternative

6. Singh. Baldev (1993): 'Suhcontracting : A self-employment channel", Anvesak, Vol. 23, Nov. 1 and 2 June, Dece. 1993.

wage employment has forced many especially the poor to seek employment by

setting up their own small trade or service units. Many of these self-employed,

especially in the service sector, possess only their labour powerwhich they sell for

low remuneration, as the shoe-shine boys, peddlers and the like do. They are

mostly own-account workers. Sometimes a distinction is made between own-

account workers and self-employed categories. The former is constituted by

those who have no establishments while, the latter categories have their own

establishments.' The self-employed also include the owner-worker of small

establishments such as the shoe-shine boys and vendors. Hence in the present

study all the petty traders in the 'UIS' are considered as self-employed. In the trade

sector, we come across a high concentration of self-employed units with no

additional workers.

The factors which influence self-employment are more than one. The

major factor influencing self-employment is the level of earnings derived from it. In

terms of income earned, the petty trading appears to be the most lucrative activity.

This could be the reason, why many of the'lS' workers are engaged in this particular

activity~

Studies on 'UIS' have also identified several other factors as reasons for

self-employment. Among these, a major factor is migration. A good number of

migrated labour force are not able to get absorbed in the modem high productivity

sector and hence they would try to find some gainful employment in the 'UIS'. But

most entrants to the 'UIS' have only little schooling. This is because, rural migrants

do not have access to schooling in rural areas and most come from poor families

which have limited resources to provide education to their children and for them,

an earning, though meagre is vital. However, there is a varied demand for skills in

the 'IS'which depends on the level of activity, i.e., manufacturing and construction

7. Varma, Visakaha. G t 1993): 'Pattern of intergenerational and Intragenerational occupational mobility. A study of Calicut cily Ph.11. Thesis, University of Mysore.

sectors would require at least some skills in the beginning, while trading activity

may not require any skill at all. It is easier to get into petty trading as a micro-

enterprise in the 'UIS' as investments and skill requirements are generally low and

income per unit is also reasonably high among the petty trading units. The risk

element is also comparatively less. Hence, most entrants to the 'UIS' may initially

enter in the form of paid either casual or wage labour. But after gaining sufficient

confidence and better financial status and better experience, he may gradually opt

for self-employment.

Self-employment thus represents a source of upward mobility in the 'UIS'.

The move to self-employment depends more on human than financial resources.

The self-employed may require some capital, but as far as the petty traders are

concerned, the cash outlay is often quite minimal. With sufficient energy and

imagination and with better confidence, an average petty trader can go a long way

by using his own labour to build up the required capital and need not start with

substantial funds. Therefore self-employment represents an appealing opportunity

for those petty traders who have been able to identify a promising area of the market

to explolt

6.7 PETTY TRADING AND ENTREPRENUERSHIP

In the Indian context, an entrepreneur is defined as a person or a group of

persons who are responsible for the existence of new enterprises. Based on this

view, a petty trader can be considered as an entrepreneur. In developing countries,

while unemployment is high, there are thousands of individuals in metropolitan

cities and towns in every part of the world who are self-employed and are running

micro-enterprises as entrepreneurs on the roadside. These entreprenuers are

hawkers and vendors. Therefore the present study also considers all self-employed

petty traders as entrepreneurs.

The places where the roadside entrepreneurs operate, are the primary

schools in which they learn the art of managements not from the books or by

attending business schools, but through the hard struggle for survival against odds.

One can see them apply all functions of management at the grass root level and

also taking calculated risks. They lack any methodology and make neccessary

investments, though little, under conditions of uncertainty. In fact competition is

ruthless and it is the survival of the fittest. Petty trading activities in the 'UIS' are

seen as expression to the deep rooted desire to become self-employed owner and

to engage in entrepreneurial activity. Hence, this sector can be viewed as a cess-

pool of entrepreneurial talent and skills which lies dormant just because of

government controls and would become the base of a true market economy and a

road to m~derni ty.~

Petty trading units in the'UIS' have been observed to be largely a breeding

ground of entrepreneurial talent as most of these units are self-established and the

participants in this sector are mostly structural (i.e., those who have made a

deliberate, conscious and rational choice to opt for and continue in employment in

the 'UIS').

Merely earning a living from certain occupations speaks forthe ingenuity

of the people engaged in them. The way the petty traders do the work, the places

they select for running their petty shops, the materials they use or deal in, the

sources from which those materials are collected all contain elements of novelty.

As far as location of their petty stalls are concerned, there was a very high

awareness among each of the petty traders, that a strategic location was imperative

if high profits were to be earned. Thus, all the petty entrepreneurs sought locations

which had high visibility, where competition was low and where demand was high.

Another factor which often influenced their decision was the likely police harassment,

8. dr Solo, H . E . (1990): "The other path", Harper and Row, New Delhi: 244,

surprise raids from the muncipal authorities and the influence of the local under-

world touts.

In the layout of their equipment one could observe the rudimentary principles

of industrial engineering. In most cases, all items were arranged in a circular manner

so that movement is minimal. Forexample, the betel-leaf seller keep the ingredients

on a tray with the most used items nearest to him. Thus, it could be said that the

roadside entrepreneur has an idea of motion study. Several other cases can also

be cited to show the ingenuity and entrepreneurial talents of the people engaged in

petty trading in the 'UIS'. Hence, it may be emphasised that while most of these

petty trading units are indeed distress induced, a significant portion of them are

undertaken with great ingenuity and entrepreneurial spirit and therefore have a high

growth potent~al.

To sum up the observations in this chapter, it may be deduced that, petty

trading activity is an important sphere of 'UIS' which plays a significant role in urban

economic life. This sector contributes to higher living standards and greater material

prosperity in the urban areas by making the goods and services available to the

consumers at the right times, at right places, at right prices and in right quantities.

The rising urbanisation has been supported by these types of informal activities for

both consumption and service needs at much cheaper rates. This sector provides

employment and incomes to millions of people who would othewise lack the means

of survival. Some even romanticise it as a breeding ground of entrepreneurship,

which could flourish if only it were notencumbered with a network of unneccessary

regulation and bureaucracy.

There are however contingent risks involved in taking up petty trading

activities, as they are normally operated from public places, through illegal

occupations. The petty traders are therefore confronted with a number of problems

in the course of marketing of their goods. Some of these problems are discussed

in detail in the chapter that follows.