The lights are out for India’s retailers

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In a previous post, I mentioned that inadequate power supply was identified by a majority of retailers in India as the single most important obstacle (from a list of 20 obstacles) to their business. In this post, I report on the extent of power outages faced by Indian retailers and the associated losses to them–these are indeed large by international standards, and especially so in the less developed regions of India. Data used comes from the survey of 1,948 retail stores in 41 large Indian cities (Enterprise Surveys, 2005)

Close to 83 percent of the retail stores faced one or more incidents of power outage during the survey year (2005). Averaged over all stores in the sample, there were about 27 incidents or 65 hours of power outages in a typical month, and losses due to these outages equaled 4.6 percent of annual sales of stores. For example, one of the largest stores selling consumer durables in the city of Dhanbad reported 495 hours of power outage in a typical month and consequent losses of 25% of its annual sales.

As a comparison, corresponding losses to retailers in 27 countries in the Eastern Europe and Central Asia (ECA) region averaged a mere 0.85 percent (Enterprise Surveys – Business Environment and Enterprise Performance Survey; BEEPS 2005). Within India, the more developed leading (high-income) states perform much better than the lagging (low-income) states. Similarly, metropolitan cities of Bangalore, Chennai, Delhi, Hyderabad, Kolkata and Mumbai are better off than the rest of the 35 cities surveyed.

You might be tempted to conclude from the table below that efforts at improving power supply in India should be directed on a priority basis towards the lagging states and the smaller cities. However, such a conclusion would be premature. What matters is the benefit from reducing power outages by an hour at the margin (net of cost) in the lagging vs. leading states or metro vs. non-metro cities. Could the marginal benefit be higher in, for example, Maharashtra, which is a leading state, relative to Bihar, which is a lagging state? In a future post, I plan to show that this may well be the case for Indian retailing.

Power outage

Source: Enterprise Surveys. The city of Ahmedabad has lowest losses due to power outages while Gurgaon has the highest. ECA refers to 27 countries in Eastern Europe and Central Asia surveyed by Business Environment and Enterprise Performance Survey (BEEPS, 2005). Metro (metropolitan) cities include Bangalore, Chennai, Delhi, Hyderabad, Kolkata and Mumbai. The remaining 35 cities surveyed are the non-metro cities. Definition of leading and lagging states is taken from Kochar et al. (2004; NBER WP 12023).


Mohammad Amin

Private Sector Development Specialist

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