The informal economy is the cornerstone of India’s economic landscape, providing livelihoods for millions of people. However, informal workers often face significant challenges that threaten their economic security and sustainability. While policy measures like EPFO (Employees’ Provident Fund Organisation) registrations and other government schemes aim to extend benefits to a broader section of the workforce, the reality for many informal workers remains precarious. This is particularly evident in the case of street vendors at Marina Beach in Chennai – a vibrant yet vulnerable segment of the economy. A recent research endeavour into studying these vendors sheds light on their struggles and offers insights into the broader issues facing informal workers across the country.
The informal economy at Marina Beach: A case study
Marina Beach, one of Chennai’s most iconic public spaces, stretches across 12 kilometres from Fort St. George to Besant Nagar and is a bustling hub of economic activity. According to estimates, around 3,000 street vendors operate along this stretch, selling everything from food and snacks to toys and providing various forms of entertainment. The beach attracts 15,000 to 20,000 visitors daily, making it a prime location for vendors to earn their livelihood.
A recent study conducted by one of the authors’ team anchored in the Populus Empowerment Network – India (PEN – India), a socio-political research organisation in Chennai, surveyed 308 stationary street vendors at Marina Beach to understand their socio-economic profile, the challenges they face, and the possible solutions to improve their livelihoods. The findings of this survey provide a comprehensive look into the lives of these vendors and reveal the multifaceted difficulties they encounter.
The survey found that the majority of vendors (61%) are male, although most businesses are managed by entire families, with women and children often contributing. The age distribution showed that 43% of vendors were between 31 and 45 years old, followed by 25% in the 19 to 30 age group. This relatively young and middle-aged workforce suggests that street vending at Marina Beach requires both physical stamina and resilience, given the demanding nature of the work.
Street vendors on Chennai’s Marina Beach. Photo: Wikimedia Commons/ Sakthi1101/CC BY-SA 4.0
Educational attainment among the vendors is generally low, with 43% having education below the 10th standard. Only 19% have completed undergraduate or professional education. This lack of education is closely tied to lower financial literacy, which poses significant challenges in terms of accessing formal financial services and managing business finances effectively.
One of the most striking findings of the survey is the significant cost of capital faced by these vendors. Nearly 50% of respondents reported an initial business investment of over Rs 25,000, yet only 7% are able to secure formal bank loans. Instead, 45% of vendors rely on private loans, which often come with exorbitant interest rates – sometimes upwards of 10% for a period of just 100 days. This heavy reliance on high-interest informal credit sources severely undermines the profitability and sustainability of their businesses.
The vendors also reported spending considerable amounts on weekly investments, with 57.1% spending over Rs 2,000 each week to maintain their businesses. However, the income generated does not always match these expenses. On weekdays, the average daily income for vendors is Rs 1,464, while profits are much lower, averaging just Rs. 897 per day. On holidays, when visitor numbers are higher, the average daily income increases to Rs. 1,867, with average profits reaching Rs 1,347. Despite these higher earnings, the vendors’ overall financial stability remains tenuous, particularly given the high costs of loans and the intense competition they face.
The study also highlighted several challenges that exacerbate the difficulties of running a business at Marina Beach. The weather is a significant factor, with both extreme heat and rain deterring customers and reducing income. Approximately, 37.7% of vendors cited adverse weather conditions as a major challenge. Additionally, 19.5% of respondents noted a decline in customer turnout, partly due to the increasing popularity of alternative shopping and entertainment venues like malls.
Competition among vendors is another critical issue. With 3,000 vendors operating in a relatively small area, market saturation is a significant problem. Many vendors sell similar products, which drives down prices and erodes profit margins.
The ongoing Metro construction in Chennai has further complicated the situation by reducing parking availability and foot traffic, particularly in areas around the ramp for the differently abled. Moreover, the survey found that 74% of vendors have no other source of income besides their vending business, making them particularly vulnerable to these challenges. The lack of diversification in income sources means that any downturn in their vending business can have severe consequences for their financial well-being.
A few suggestions
To address the pressing needs of informal workers, particularly street vendors like those at Marina Beach, a comprehensive approach is essential. Access to affordable credit remains one of the most critical needs. Cooperative banks can play a pivotal role in this regard by offering low-interest loans with flexible repayment terms that are tailored to the specific needs of informal workers.
The government’s PMSVANidhi scheme, which provides microcredit to street vendors, should also be more actively promoted among vendors. This can help reduce their reliance on high-interest private loans, which currently account for a significant portion of their initial business investment.
Improving financial literacy is another vital component of supporting informal workers. Tailored financial literacy programmes can empower vendors to better manage their finances, make informed decisions, and ultimately, break free from the cycle of high-interest debt. These programmes should cover essential topics such as budgeting, savings, credit management, and investment strategies.
By equipping vendors with this knowledge, we can help them build a more secure financial future. Regulatory measures are also crucial in ensuring fair competition among vendors. The market at Marina Beach is currently saturated, with too many vendors selling similar products. This drives down prices and makes it difficult for individual vendors to maintain profitability.
To mitigate this, the number of vendors operating in highly saturated areas should be regulated. Additionally, the process for allocating vending licenses must be transparent and fair to ensure that all vendors have an equal opportunity to succeed. Allowing more flexibility in pricing strategies would also enable vendors to better reflect market demand and improve their profitability.
Social security and welfare programmes must be strengthened to provide a safety net for informal workers during periods of economic downturn or disruptions, such as adverse weather conditions that prevent them from operating. Compensation during such periods would help vendors avoid falling into debt and maintain their financial stability. Expanding awareness and accessibility of existing welfare schemes, like those offered by the Tamil Nadu Street Vending and Shops and Establishments Workers’ Welfare Board, is also essential.
Finally, improving the infrastructure at Marina Beach can enhance the working conditions for vendors and the overall experience for visitors. Better facilities such as restrooms, dustbins, and drinking water stations are necessary not only for the convenience of vendors but also for maintaining a clean and inviting environment that attracts more visitors, thereby boosting business for the vendors.
The case of the Marina Beach vendors offers a microcosm of the challenges faced by informal workers across India. Despite their resilience and the vital role they play in the local economy, these vendors operate under conditions that threaten their long-term sustainability. By expanding access to affordable credit, improving financial literacy, ensuring fair competition, and strengthening social security measures, we can help these workers build more secure and prosperous livelihoods. Ultimately, a comprehensive approach that addresses the financial, regulatory, and social needs of informal workers is essential for their empowerment and the broader economic development of the country.
Vignesh Karthik K.R. is a Postdoctoral Research Fellow of Indian and Indonesian Politics at the Royal Netherlands Institute of Southeast Asian and Caribbean Studies, Leiden; and a Research Affiliate at the King’s India Institute, King’s College London.
Devika Rani holds a PhD in Journalism and Communication from the University of Madras; and currently heads the Data Journalism and Policy Research Team at Populus Empowerment Network – India, Chennai.
