Back to Barter Economy

In the past exchanging goods was the main economy.When time passed this age old custom thinned down. After the financial tsunami world is reinventing barter economy.

Saira Karupu and A. Divya write in The Times of India, 11 May 2009

When Delhi housewife Lata Chauhan allowed a widow to live in her home in exchange for household work, she was simply trying to stretch
a budget slashed by pay cuts and price rise. But in so doing, Chauhan had become part of a global trend towards barter, which is reviving the world's oldest form of payment — goods or services in lieu of cash.

Chauhan says she has a friend who doesn't pay the man who cleans her car but gives him her son's old clothes and notebooks instead. Yet another barters vegetables from the garden to compensate the gardener. Chauhan is part of the droves — homemakers, professionals, small traders and companies in India and abroad — who are holding on to precious cash reserves by doing business in kind. Ruby Agarwal, director of Mumbai firm Benefit Barter, says, "Companies are flooded with unsold goods because of low sales. Barter is a boon for them to reduce surplus stock."

She says, "Many companies which were on the verge of collapse have survived." But Anup Dutta, chief operating officer of Delhi company BBX India, says "barter is still just a fraction of Indian trade". He says 30% of world business is barter; Indian barter is a mere 10-12% of trade. America's Universal Barter Group claims 65% of the companies on the New York Stock Exchange are involved in barter. Is it any wonder the world is asking: Why buy when you can barter?

The global trend towards barter is fast catching up. Ruby Agarwal, director of Mumbai firm Benefit Barter, says, "Companies are flooded with unsold goods because of low sales. Barter is a boon for them to reduce surplus stock." Agarwal adds that they are being flooded with so many queries that it's difficult to take all of them.

From an East London pub that accepts goods and services for a pint of beer to teens swapping clothes and books online, to ad executives in Singapore offering advice to hair salons in exchange for a perm, swap is the new global money. Just check out the client profile of Indian firms engaged in barter big companies, hotels, travel firms. Indian professionals such as architects, doctors, web designers and tutors are also signing up.

For Jose Varghese, owner of I Dance, a dance training institute in Delhi, barter has meant saving money. "I am getting two things done at one go," he says, explaining he bartered dance lessons for pamphlets promoting his services. It says something that BBX arrived in India last year and already has 500 clients. Its turnover was Rs 1.5 crore in its first year. "If 10 seats out of 50 in a restaurant are lying vacant, we can get clients to fill them up. It's a win-win situation," says Dutta. The bartering firm usually charges the seller 10-12% of the transaction value.

"Some of the most popular goods and services available for barter are media space, TV commercials and electronics. The media is big barter business," says Amit Kher, V-P of Delhi's Net 4 Barter, which has 1,000 active clients and an annual turnover of Rs 40 crore.

Are we reinventing the old wheel? Barter is one example which points to the past methods to overcome the financial crisis.