Life (or something like it) after Sharada – Chawm Ganguly

chawm ganguly“What is going to be the socio-economic and political fallout of the Sharada fiasco” is the question that everybody seems to be asking these days. The law will certainly take its (albeit, long and arduous) course and justice will be delivered in the last reel. Politics will get murkier as the issue is pregnant with possibilities – some politicians who have already committed hara-kiri will fall by the wayside, pulling down many more with them – and some of the dirt that is being thrown about will certainly stick.   Let us try and address some of the more pertinent issues:

Q1. Will the depositors who have lost their all, get their monies back?

No. Even if some (read a handful among the millions) get a pittance, it will be too little, too late. As for the INR 500 crore (INR 150 crores to be raised by taxing tobacco and rest coming from the smoke it is supposed to generate) is just another enigma wrapped in a riddle, packaged in “Red” (nothing to do with the Communists though) tape. What has gone, has really, truly, gone! The faster we accept it the better, especially for those who lost everything in their haste to worship Mammon.

Q2. Will there be a run on the MLM companies aka Chit Funds, aka the group companies?

Yes. Politically, these companies are hot potatoes and no one will expose himself to guard their interests. “If the Government cannot stop the chosen one from folding up, who will save these small fries” is the murmur on the streets and it is a matter of time before the “purge” begins. We will witness a “reverse multiplier” as a run on one will transform into a run on the others with none of these having the ability of muster enough cash to stave off the inevitable. Naturally, when they fall, they will also bring down with them, their ancillaries and the businesses that owe their survival to the parent – what I am saying is, entire “Groups” will fail. No less.

Q3. What will be the socio-economic fallout of such a situation?

For one, land prices, especially in the suburbs will crash. Most of these companies have heavy exposure in land (real estate, development, et all) and distress sales will bring the prices crashing down as a sudden glut in supplies will not be matched by enough demand. Besides, no one has pockets deep enough to mop up the deluge from the group companies.

Secondly, there will be a steady rise in criminal activities. The “agents” used to a heady lifestyle thanks to the hefty commission they earned by mobilizing deposits will look for alternative avenues to earn their victual. With no legitimate avenues open before them, many will take to crime, in which they will be joined by the out of work muscle men these companied had employed to further their various illegal causes.

Finally, the hospitality and the film industry will be hard hit. With the cash drying up, the so called resorts and the garish excuses that passed off as Bengali Commercial Cinema will be hit for a six. I will not be surprised if the remuneration of artists (which had gone up by about 50 % in the near past) seek more realistic levels. As for those song sequences in exotic locations: Producers and Directors will have to learn to do without them.

Q4. Does it mean the end of Chit Funds then?

Hell no. As long as the common man is driven by greed, there will be charlatans willing to help the fool part with his money. The names will change, perhaps even the modus operandi, but the Funds will remain. Sanchayita, Overland, Verona … the list is endless and will only get fatter by the inclusion of the new breed. I do not know if this boom-bust-boom is cyclical, but it is frightening how every decade, sees a new avatar doing a Pied Piper!

Q5 What needs to be done now?

Firstly, the interest rates, especially in cases of Small Savings will have to be made more rational and market realistic.

Secondly, more and more villages will have to be brought under the banking umbrella.

Thirdly, Post Offices and other places that the Government uses to mop up the scattered savings at the bottom of the pyramid will have to be made more market driven and consumer / user friendly. If you force someone who deposits INR 100 daily to wait in the counter for two hours, he will certainly give his money to the “collection agents” of the chit funds, inherent risks notwithstanding.

Fourthly, create awareness, especially among the weak and the vulnerable. If possible use the Panchayets to reach out and communicate not only why people should save, but also the options open before them and the things to guard against.

Finally, what about compulsorily putting images on every printed paper / advertisement of companies wanting to raise money from the public of demons just like the ones we have on Cigarette packets warning investors about the risks of investing in dubious schemes? A picture, like they say, is worth a thousand words, and will certainly stop agents from claiming that a particular company or its schemes enjoy the patronage of a particular politician or party among other things.