New Year Double Issue

The Barter Country

The most fundamental economic interaction is in vogue again

Madhavankutty Pillai Madhavankutty Pillai | 21 Dec, 2016

SOON AFTER THE announcement of the demonetisation policy on November 8th, with currency sucked out of the system and people unwilling to spend what small change they had, a slew of stories on barter started going viral on social media. One Bangalorean who had come to Mumbai and found himself without change bought a rickshaw ride by giving the driver rice purchased with his credit card. A tweet spoke about a man exchanging ladies’ fingers for wheat with his neighbour. An article in The Wall Street Journal with the headline ‘Barter Economy Is Reborn in Villages as India Cancels Cash’ quoted a shopkeeper in an Odisha village giving ‘one customer a kilogram of potatoes, cauliflower and tomatoes for half a liter of honey’, and being quite satisfied with it because ‘in normal times, the honey would be 120 rupees in the market (around $1.80) and the vegetables 70 rupees.’

In Delhi, Rieti Phalpher also found herself suddenly becoming part of a barter transaction. A wedding planner who had been working in the domain for four years, she was doing a roka, a pre-wedding event, for a client. There was a lot of floral decor involved in it and when payment talk came up, the client spoke of his currency crunch. Says Phalpher, “The conversation was like—‘I will give you in the old currency? Can I pay you by cheque later?’” He then noticed that her phone was an iPhone 6 and asked whether he could swap an iPhone 7 in lieu of the floral arrangement. “He told me he was travelling to the United States and offered to get me one,” she says. The deal—flowers for phone—was done.

The iPhone 7 is the apogee of digital age consumption, but barter is said to go back to the beginnings of civilisation before the advent of money when human transactions, not involving stealing or snatching, began being conducted. As coins and then paper currency came in, it replaced the ‘double coincidence of wants’—you must have something that I need and I must have something that you need—which is a perquisite for a barter deal to take place. Money does away with that requirement—a Rs 500 note, if you can find one, can be used to buy anything from any seller of that value.

It is understandable that in times of extraordinary queues, barter would raise its head. But actually it has always been slyly in the background. For example, Pooja Bhayana launched a barter business using apps a couple of months before demonetisation. In October 2015, she had been sitting with a friend over coffee when he told her that he had a Tablet to sell but was not getting a good price. She knew a common friend was looking to sell PS4 games and suggested they exchange. The success of that transaction made them set up a Facebook group where people could barter. “In the first four hours, we had about 5,000 members. We added our friends and they added their friends. Today we are about 184,000 people in the group,” she says. The first deal in the Facebook group happened on day two when someone exchanged an LCD TV for a stereo system.

In September this year, the two of them co-founded Let’s Barter, a startup based on bartering over an app. “What we are trying to do with Let’s Barter is solve the problems faced by the barter industry via technology, like value disparity or the question of trust,” she says. The app can, for instance, show mutual friends or how many kilometres away the person is whose listing is being viewed. The basis on which they expect barters to happen is perceived value. “If you say that ‘My three-year-old iPhone is worth 4,000 rupees’, then the system will give you items in the same range and you have to talk to the other person whether they agree with your perceived value or not. In the perceived value system, you generally get more value,” she says. A book that you have already read has lost its value but you could still exchange it for a new book with a lower MRP because the latter has new information and knowledge.

Bhayana sees two main categories of people interested in barter over the app. There are the young adults who have a lot of stuff but not enough money to buy more. Like a treadmill that has ended up as a clothes hanger, which to someone else may be worth a smartphone. The second category are housewives, who understand what they need or don’t need in their homes. Some of them even barter services. “There is this housewife in Varanasi who wrote to us saying that she came to Let’s Barter and taught someone in the neighbourhood how to cook, to get books for her child,” says Bhayana.

Their Facebook group gets 200 posts daily, of which 50 to 60 are moderated out for being objects for sale or just spam. When demonetisation happened in November, the app saw a 150 per cent spurt in downloads. The most popular items being bartered happen to be electronics. The services on offer include photography, web development and graphic designing.

A VESTIGE OF THE traditional barter economy survives in tribal villages, especially of the Northeast. In 2010, Current Science published a paper by Dr Ranjay K Singh on a study on this conducted through the College of Horticulture and Forestry, Central Agriculture University, Pasighat, Arunachal Pradesh. Between 2003 and 2009, a series of 28 workshops were organised in remote tribal villages of Arunachal Pradesh and the eastern Himalayas where local participants shared their knowledge and experience of barter. In an email interview, Singh, currently a principal scientist with ICAR-CSSRI, Karnal, Haryana, says he found the objective of barter deals there was to exchange ideas, facts, feelings and goods in a cashless economy, enabling the community ‘to have self-reliance without accessing external resources since they live in far flung areas and harsh climate’.

Barter happened both within tribes (such as Pasi and Minyong) and between tribes (Adi and Galo, Galo and Memba). What was exchanged included plant based foods, animal based foods, stones and armaments. ‘These tribes live at different levels of altitude. Differences in altitude evolve the diversity in plants and animals as well as other cultural items a tribe develop. Accordingly, the barter between and among them is decided,’ he says. Language barriers were overcome by using mixtures of several words to make a sentence. ‘For example, they use a few words of Adi, a few words of Assamese and a few words of Bengalese. [The] remaining communication takes place with body language and gesture,’ he says.

What we are trying to do is solve the problems faced by the barter industry via technology, like value disparity or the question of trust

The barter economy had numerous benefits there, like sustaining the ecosystem, biodiversity and culture. ‘For example, plant species Onger and Pakkum saag are found more at lower altitude of East Siang, while some chilli varieties at the higher altitude of West Siang and other districts. To have access and use of these resources, the concerned communities have to conserve and exchange. These bonds evolve into a number of ecological practices such as patch burning, controlled harvesting, spreading the elephant or cow dung to inculcate herbs to use them in food, etcetera. So this has an indirect as well as a direct relation to sustain biodiversity and related culture,’ he says.

In the case of the Mizi and Monpa tribes, who were prone to conflict over sharing grazing lands of neighbouring territories, barter created harmony. ‘Sometimes due to a resource crisis and over occupying areas of grazing land, they have disputes. But with the cultural exchange, harmony is evolved and balances inter-personal relations. For example, Monpa celebrate La-Su-See festival, which takes place [for] about a week. The priest who performs the main rituals comes from the Mizi community. After the ritual is done, food made of plant and animals (a few crops such as barley and maize are cultivated by only Monpa, while Mizi are more accustomed to dry fish and store them) and some traditional handicrafts and armaments are exchanged between the Mizi priest and the Monpa community. This cultural exchange develops bonds to not only create communal harmony but also sustain biocultural knowledge,’ says Singh.

Singh believes that barter is a kind of compulsive human behaviour which evolves mostly in resource constrained, far flung areas where culture is still a major asset for a community. ‘So, I guess, in most of the mountainous ecosystem of India, particularly northeast India, where communication is still a challenge and development light of government has not yet reached, the barter system may be in practice in different forms,’ he says.

The paper, however, notes that the barter system was gradually ending in the region. ‘Wherever road communication transport, phones, and modernisation is increasing, barter is reducing. The problem is more among new generation who are not much interested in practising a barter economy as they believe more in the materialistic world,’ says Singh.

At the other end of barter in subsistence-level communities are those deals that happen in the corporate world. It was as far back as the year 2000 that Rakesh Bhatnagar decided to get a slice of this then unorganised pie. He had got an inkling of its potential while working in UTV, which at that time used to run Teleshopping Network, India’s first home shopping channel. “We needed outdoor advertising. The first thing that comes to mind is ‘Let’s try and attempt a direct exchange’. We started meeting various media owners and saying, ‘Listen, we need your outdoor sites and can we give you these products?’ We figured out everybody was open to an exchange but they didn’t necessarily want what you were offering. We realised exchanges are possible, [but] direct exchanges are a big problem because of trying to match one-to- one requirements. Therefore you needed a kind of a marketplace model and something managing it which could facilitate multi- party exchanges. That is how the interest came in,” he says.

It was a herculean task to make people understand what barter was. It was an alien concept. Gradually, people started taking to it

Bhatnagar founded Net4Barter (Network4Barter now) and the initial plan was an internet-only model on the back of the ongoing dotcom boom. But then the bust followed and it went offline. “At that point of time, it was a herculean task to make people understand what barter was. It was an alien concept. Gradually, people started taking to it,” he says.

Large corporate barters are mostly connected to the media sector. One of his first deals was with a multinational electronics company, which provided appliances in return for which Bhatnagar got it advertising. “All these companies were stuck with inventories. They found it a very novel idea that they could pay for their media purchases with inventories,” he says. The media organisation in turn uses the products it gets for business ends like increasing circulation by providing freebies along with subscriptions. Bhatnagar says, “If you look at magazines, they have primarily increased circulation through subscription offers. It is a critical part of their business model. Typically, take a subscription for 1,000 bucks and get a mixer grinder of 1,000 bucks along with it. Then newspapers also started doing it very aggressively. In fact, Dainik Bhaskar’s entire growth strategy was backed very aggressively by barter,” he says.

While there are no definite numbers to the size of the corporate barter sector, Bhatnagar estimates that aggregate transactions that take place annually through companies like Network4Barter would be in the range of Rs 500-700 crore. And then there are the direct barters that companies do without middlemen. Like Times of India and Hindustan Times doing what are called ‘private treaty deals’ where in exchange for advertising they take equity, real estate, etcetera. “That would run annually into thousands of crores. There are hotels and airlines doing direct deals,” he says. “We have worked with lingerie players to doctors to actually having surgeries done on barter by a hospital chain specialising in kidney stones. Once we got an entire magazine printed on barter.”

Barter is important for businesses because of two key reasons—it is a potent tool to help save cash, and, secondly, to liquidate inventories. Bhatnagar has now launched Kashmate, an app driven business for barter involving Small and Medium Enterprises. “In Network4Barter, we are looking at larger brands, our ticket sizes are large. Just like larger brands, SMEs—designers, lawyers, doctors—also want to barter to avoid spending cash, bring in more customers, liquidate excess capacity and stocks. That is where Kashmate comes in,” he says.

Harinder Singh, founder of BarterDaddy, started with real estate barters a decade ago. He would connect people looking to selling a property to real estate developers who would take it and in return reserve an under-construction property for them, while giving them a sum till that happened. “We got a good response. Because if you are selling a property, [there’s a] 90 per cent [chance] you will reinvest in real estate only. With such a barter, you don’t have to hunt for another property, and it made sense for the builder who got a ready property that could be monetised in the market by way of mortgaging or reselling and he also got his sales done,” he says.

Singh then took the idea online with BarterDaddy, not limiting it to real estate. He sees service barter deals picking up now. “Like chartered accountants, they are ready to offer their financial services; lawyers, I get a lot of queries from; digital marketing professionals are ready to develop websites on barter. Every business has a scope of 10-15 per cent leveraging of its products and services in barter,” he says.

Barter also makes its presence felt in unexpected places in India, like in economic dealings with Pakistan. In two spots across the Line of Control in Kashmir, Indians are permitted to trade with Pakistanis on a select list of 21 items. But the catch is that they can’t use money and deals are struck through barter without— even more strangely—the parties ever meeting each other. The system was instituted in 2008 as a confidence building measure. A 2015 article in the Economic and Political Weekly notes, ‘Trade at the LoC is facilitated by trade facilitation centres (TFCs) that have been set up at Salamabad (Uri) and Chakan-da-Bagh (Poonch)… Initially, trade was permitted twice a week with only 25 trucks from both sides being allowed to cross the LoC each day. However, following ministry-level talks between the foreign ministers of India and Pakistan in July 2011, trade was allowed to take place four days a week with 100 trucks from both sides allowed to cross-LoC per trading day. The 21 items identified under this arrangement for trade enjoy duty-free market access. The basket of tradable goods consists of agricultural products, and some handicraft and handloom products. The list does not contain any manufactured products. Despite trade in limited items, LoC trade has expanded from $0.3 million in 2008-09 to $97.2 million in 2011-12. In 2011-12, imports comprised dry dates, almonds, walnuts, carpets, Peshawari chappal, dry grapes, whereas exports comprised imli, cardamom, dhania, red chilli, embroidery items, black pepper, rajma, and coconut.’

The turnover, however, is little compared to what is possible— because barter is a constraint. The article says, ‘Since the modalities of the trade do not allow trade to take place through a financial intermediary, the real costs faced by traders is that there is no guarantee of equal return and recovery of differential amounts from counter parts across the LoC.’ To increase trade, the Jammu & Kashmir government announced this April that it would do away with barter and bring in regular financial transactions. But with tensions on the rise at the border, barter is expected to continue for some time there.

Similarly, it remains a phenomenon in pockets of urban and rural India, where people see value in this most fundamental of economic interactions. One of the members of the Facebook barter group that Bhayana started is Hemika Narang, a product designer from Delhi. She came to know about it through a friend who had been looking for a particular type of hat, saw it available in the group, and exchanged it for a scarf. She told Narang to check out the group too. A few months ago, Narang did her first barter there when someone listed Mi Gold bluetooth speakers. “I asked him whether he wanted a brand new pair of Apple earphones. His speakers were three months old. I thought it was a good deal for me. The value was more or less same,” she says. And then she bartered once more, this time a one-month Netflix subscription, that had come about by chance. “I got it when I was moved [by Netflix] from free to paid automatically. I don’t use Netflix. So I put in details about what kind of membership it was, the price and till when it was valid,” she says. When someone offered a laptop cover that she could use for her Macbook Air, Narang decided the trade was worth it. “People might be hesitant about barter initially, but it is the same with any new concept,” she says. Except that the ‘new’ concept is actually one of the oldest in mankind’s history.