What I learnt about the state of markets in India from a conversation with my grandmother.
My maternal grandmother belongs to a rarified subset of people: she falls at the intersection of all who have read the Valmiki Ramayana in Sanskrit, and the Lord of the Rings in English. I always learn something new when I talk to her, given the five odd decades of difference in our perspectives. A recent conversation with her sparked a few thoughts on how markets work in India when I spoke to her about cotton wicks.
My grandma makes her own cotton wicks for lighting lamps. She takes a tuft of cotton, twirls it around her fingers and keeps adding cotton till there is a bushy tuft at the base and a stiff stem of cotton leading up top from it. This can be easily lowered into a variety of different lamps, doused with oil and lit aflame. With age and with softening hands, she uses a dab of water to retain her grip on the cotton.
This sounds like a very natural thing for grandmothers to do, if you asked the average Indian grandchild. But it would also seem rather odd to an observer who has no context – why would a well-to-do old woman spend so much of her time labouring over something as simple as cotton wicks? Why would she not just buy them in the market instead? It is easy to dismiss such behaviour as the pedantry of the old, but there are often better explanations.
When asked why, my grandmother explains. Apparently the cotton wicks that are available in the market are too ‘loose’, where the wick is not tightly wound and is liable to get droopy and annoying to deal with. They also are often too thick, containing far too much cotton in the wick, leaving residues upon burning. What she makes remains far superior to what is commercially available, and she prefers to stick to that. She even goes far as lamenting how a couple of her daughters are forced to buy the inferior ones from the market.
What this actually means is that the market is not yet mature enough for cotton wicks. If the supply of cotton wicks were more sophisticated, someone would have figured out that tightly wound cotton wicks can perhaps be sold at a higher price to the discerning grandmotherly customers. It means that while the market is currently flooded by generic cotton wicks, there is the potential for the market to attract new buyers if they do two things: increase quality; and through signalling differentiate the two products. While this is true, there is also a lack of maturity on the demand side. A mature set of conumers will acknowledge that quality often demands a premium and are willing to pay for it.
This little nugget illustrates a lot of what people in India are going through while dealing with markets. Till the 90s, the Indian economy had not opened up and we used to highly regulate most markets. Incomes were also lower, whereby most families figured out how to produce a large variety of small goods that they consumed themselves. At best, they would be barters from a kind grandmother to some of her children.
As markets slowly developed, many people developed a disdain for goods that were commercially available, preferring the quality of home-crafted goods, romanticising the notion at the same time. Along with the disdain came a distrust of what the market could offer. This also means that the most discerning consumers retreated from the market, thereby making markets mature a lot slower. The notion of paying higher for better quality is being discovered rather slowly, with cost-saving being the primary reason for engaging with the market.
Forget cotton wicks, this explains the state of Indian markets in most goods – from agricultural produce to home food, Indian households prefer to consume a lot of things that they produce themselves. This retreat from markets denies people the opportunity to specialise, and reduces the amount of welfare one can gain by engaging markets.
Even my grandma readily admits that she’s much happier using clean cotton today compared to the seed-ridden, dirty cotton from a decade ago. She does not have to clean the cotton and she is happy to pay the premium for it. Here’s to hoping that Indian markets mature soon to deliver the kind of cotton wicks she wants, and more.