“Everything is good, good,” a nervous seller of sundry kitchenware tritely assures a customer when asked how business is going at the Grand Bazaar. At first glance, one is inclined to believe him.

On the first of the month of Mordad (23 July), Tehran’s ten-kilometer covered market appears to be in a healthy mid-day bustle. Housewives in chadors haggle over piles of pots and pistachios, frenzied textile vendors dance between inquiring customers in their narrow shops, and an eclectic clientele lines up for seats at Sharaf-al-Islami, a locally renowned kabab purveyor. Initially, the business-as-usual atmosphere appears in stark contrast to the fatalistic economic prognoses so often voiced in other parts of the city. Then, the owner of a busy shop selling Chinese-made home accessories sets the record straight: “Don’t be thrown off by the way it is today. It’s the first of the month, and everyone’s got their salary. Business was awful last month,” he says, pointing to a pile of rainbow-colored shag rugs near the entrance of his shop. “On a normal day, I’d just be sleeping here.”
Though not all of its members seem willing to say so, a recent visit to the bazaar suggested that one of the traditional pillars of the Islamic Republic has hit on hard times. The stagnating economy and the inflationary effects of President Ahmadinejad’s recently implemented subsidy reform program have made profits uncertain, especially for importers who buy foreign goods on credit and have to reckon with the falling value of the rial. By removing longstanding subsidies on energy, the reforms have increased costs of locally manufactured materials, causing further price hikes. Although initially pressured by government agents to refrain from price-gouging, vendors have been compelled to raise prices by as much as 35 percent to cope with the combined pressures of inflation, sanctions and rising production costs.
Consumers are thus exposed to exorbitant prices for basic products. For example, a basic cotton bath towel produced in the northeastern city of Tabriz was priced at 23,000 toman, or around $20. When a customer attempted to haggle, the shop owner blamed a confluence of domestic and international pressure for the high price tag. “Before the new year, we experienced 10 percent inflation because of the subsidy cuts,'” he explained. “The towels are made in Iran, but the cotton comes from either Pakistan or Uzbekistan. The shipments in Pakistan were cut off because of floods, and all of the Uzbek cotton was bought out by China. Iran now has to buy cotton from China at higher prices. Because of all that, we now have 35 percent inflation.”
In the adjoining carpet section — one of the bazaar’s traditional cornerstones — merchants also complained about higher production costs. The subsidy reforms are taking their toll on the age-old craft of carpet weaving, one merchant said. By handing out monthly $46 per capita cash payments to the population, the government is creating a disincentive for rural-dwelling female carpet weavers, one merchant said. “Some of them have ten children, and with the cash subsidies they can earn up to 500,000 toman per month. With the wages we’re used to paying them, it doesn’t make sense for them to work. Instead, they’re looking to have more children.” The merchant did, however, admit that by pushing up wages, the cash handouts were fulfilling their intended purpose of improving carpet weavers’ living standards. “It’s good for them, but it’s a big hit on the price of production,” he added.
Elsewhere in the bazaar, vendors complained of price increases of basic materials. The decreased cost benefit of producing domestically has driven other merchants to import finished goods from abroad. “I started buying everything from China, because it just didn’t make sense price-wise to produce on my own anymore,” said one hardware store owner.
Even such cheap basics as plastic bubble wrap has increased in price by 10 percent since March, said another vendor. “I have three sons at home who are your age, and all I care about is what will happen to them,” he told a passerby in his mid-twenties. “Because in this way, I see the bazaar is becoming volatile. The prices are constantly changing and there is no security in anything.”

Source : Tehran Bureau