Saturday, March 31, 2012

The great Indian obsession with the currency 'change'

A subtle incident at a tiny shop in a railway station prompted me to write about something I've been curious about for a long time. I purchased something priced at Rs 4 and gave the shopkeeper a 10-Rupee note. I think I held my expectations too high when I thought that getting Rs 6 back in change was no big deal. As usual,  the shopkeeper asked me if I've Rs 4 in change, to which I replied in the negative. The shopkeeper asked the same question again, and this time I had to show some genuine concern to his recurrent request and I reached my pocket. I somehow managed to dig out Rs 3 in change and told the shopkeeper that that's all the change I had. I think I underestimated the preciousness of the currency change, when I expected that the shopkeeper would ultimately relent, and return Rs 6 to my 10-Rupee note. The unexpected happened, and to my surprise, the shopkeeper agreed to accept Rs 3 for an item priced at Rs 4. (Ain't it a defiance of basic rules of business?)

I've always been amazed by the way currency of smaller denominations is valued at the various stores in India. How many times have you seen the shopkeepers reluctant to give away the change? How many times have you seen the shopkeepers ready to lose profit instead of giving away the change? How many times have you seen the shopkeepers saying they don't have change and then ultimately digging out the precious change from their gallas when left with no other option?

How can the otherwise profit-conscious businessmen succumb to a futile thing like change? Either there is a serious scarcity of smaller denominations of currency or there is something wrong in the system. Or wait a there something bigger going on here...something of the sort done by Dhirubhai Amabani, who used to collect Yemeni coins and then melt those to sell for a bigger profit?

I'm really clueless about these questions. With my limited business acumen, the only thing that strikes my mind  is to open a currency exchange shop, which would shell out smaller denomination currencies in lieu of the higher ones, keeping some profit margin.