Understanding Markets: A Shirt in the Market

• This chapter tells the story of a shirt, from cotton production to sale, highlighting the market chain linking producers to consumers.
• The chapter explores whether everyone in the chain benefits equally, or if some benefit more than others.

A Cotton Farmer in Kurnool

• Swapna, a small farmer in Kurnool, Andhra Pradesh, grows cotton, but harvesting takes several days due to the bolls not bursting at once.
• Swapna borrows ₹2,500 from a local trader at a high interest rate for seeds, fertilizers, and pesticides.
• The trader makes Swapna promise to sell all her cotton to him.
• Cotton cultivation requires costly inputs like fertilizers and pesticides, compelling small farmers to borrow money.
• At the trader's yard, Swapna's cotton fetches ₹6,000 at ₹1,500 per quintal, but the trader deducts ₹3,000 for loan repayment, leaving Swapna with only ₹3,000.
• The trader justifies the low price by saying cotton is selling cheaply due to market abundance.
• Farmers have to depend on him for loans not only for cultivation, but also to meet other exigencies such as illnesses, children's school fees. Also, there are times in the year when there is no work and no income for the farmers, so borrowing money is the only means of survival.
• Although Swapna is aware that cotton could sell for at least ₹1,800 per quintal, she does not contest this because the trader is powerful and farmers rely on him for loans.
• Swapna's earnings from cotton cultivation are hardly more than a wage laborer's income.

The Cloth Market of Erode

• Erode's bi-weekly cloth market in Tamil Nadu is one of the largest in the world, selling a large variety of cloth made by weavers from surrounding villages.
• Cloth merchants with offices around the market buy cloth, and traders from south India also purchase cloth there.
• Weavers also bring cloth made on order from merchants, who supply cloth to garment manufacturers and exporters nationwide.
• The merchants purchase yarn and instruct weavers on the type of cloth to be made.
• The putting-out system involves merchants distributing work to weavers based on received orders, providing yarn and receiving finished cloth.
• This system benefits weavers by eliminating the cost of yarn purchase and the problem of selling finished cloth.
• However, weavers are dependent on merchants for raw materials and markets, giving merchants power to dictate low prices for making cloth.
• Weavers invest savings or borrow at high rates to buy looms, each costing ₹20,000; a small weaver needs to invest ₹40,000 for two looms.
• Weavers and family members work up to 12 hours daily on these looms, earning about ₹3,500 per month.
• The putting-out system involves merchants supplying raw materials and receiving the finished product, common in India's weaving industry.
• Weaver's cooperatives reduce reliance on merchants, allowing people with common interests to work together for mutual benefit and higher income for all.
• Cooperatives involve weavers forming a group to procure yarn and manage marketing, diminishing the merchant's role, and getting a better price for their cloth.
• The government sometimes helps cooperatives by buying cloth at reasonable prices, such as for Tamil Nadu's Free School Uniform programme.

The Garment Exporting Factory Near Delhi

• The Erode merchant provides cotton cloth to a garment exporting factory near Delhi to make shirts for foreign buyers.
• Foreign buyers, businesspersons from US and Europe owning store chains, demand the lowest prices, high production quality, and timely delivery.
• Exporters strive to meet these demands, so garment exporting factories cut costs and maximize work from workers at the lowest possible wages.

Earnings and Costs

The Impex garment employs 70 workers, mostly women, on a temporary basis, allowing dismissal when not needed.

• Wages depend on skills; tailors earn about ₹3,000 per month, while women helpers in thread cutting, buttoning, ironing, and packaging receive the lowest wages.
• A shirt sells for $26 or about ₹1,800 in a US store.
• The businessperson from US purchases the shirts from the garment exporter in Delhi for an unspecified amount per shirt.
• They spend ₹400 per shirt on advertising and ₹200 on storage and display, making the cost to the businessperson ₹900.
• The garment exporter sells the shirt at ₹300 per piece.
• The cloth and raw materials cost ₹100 per shirt.
• Worker wages are ₹25 per shirt.
• Office costs are ₹25 per shirt.

Market and Equality

• A chain of markets links the producer of cotton to the buyer at the supermarket.
• Not everyone gains equally in the market despite their involvement in buying and selling, and their hard labor earnings are insufficient.
• Foreign businesspersons make huge profits compared to garment exporters, while garment factory workers barely earn enough for daily needs.
• Small cotton farmers and weavers at Erode work long hours but don't get a fair market price.
• Though markets offer work and the chance to sell, the rich and powerful often gain the maximum earnings.
• The poor depend on the rich for loans, raw materials, marketing, and employment, leading to exploitation in the market. Cooperatives of producers and enforcing laws are ways to overcome this exploitation.