The first warning bell was when a certain company started advertising in the popular media exhorting one and all to invest in their lucrative “potato bonds”. The ads offered as bait too good to be true returns on investment for short periods of time and I was genuinely irked. I called a friend who owns a cold storage and is closely associated with the potato business. “This is the organised entry of the chit funds in the business” he lamented. “Time for us to move out, before we are given the shove” he added.
“It is all about buying cheap when there is a bumper crop and holding on to your hoard in the cold storage till the supply dries up and demand ensures a decent return on your investment. While we used to operate by taking loans from the moneylenders, these Chit Funds with their piles of cash are entering the fray like a gale, turning conventional logic in the head. With political backup and media houses as subsidiaries, they are just too strong an adversary to compete with and too flush with free funds to pay heed to logic.”
The Sarada bubble has since burst. The particular Chit Fund (for the want of a better name) has been censured in the Courts and investigations are on. But the potato trade is already in the shambles. Cold storages that were gasping between the devil (spiraling electricity, interest and other costs) and the deep sea (stagnating rents, fluctuations of commodity trade) have been dealt a body blow. Farmers have lost out, touts have had a field day and the entire mechanics of the trade has been irretrievably destroyed.
“It’s worse in the hospitality sector, with almost every second hotel and resort allegedly owned by Chit Funds” said a veteran journalist. “This sector will be hard hit, as will be the construction industry, as a run on these funds will force many to take the route of distress sales to meet their immediate liabilities (that the assets on the books were highly inflated and often made no business sense is another matter – remember, most fund owners, having purchased what they thought was “political patronage” considered themselves above the law and did not harbor any intention of refunding the monies – either capital or interest). Land prices will fall, as a sudden glut in the market will literally blow the bottoms off the market with no demand to match. Remember, you are in a state that is virtually bankrupt – an economy that cannot boast of any significant industrial investment in the recent past and no son of the soil industrialist worth his pass book .”
In context, the Jindal pullout from Salboni is loose change. This is because, peculiarly, the current Chit Fund fiasco, as opposed to a city-centric phenomenon of the past, had its real roots in the villages. Most of the MLM companies going bust are from far flung places as were the agents that had raised the monies locally. Used to earning commissions that were well beyond their abilities (and sometimes, even dreams) these agents (and the petty politicians and bureaucrats whose palms they had greased) had become the “creamy layer” a “neo bourgeois” class that can neither find alternative employment (remember, no industries) nor maintain the lifestyles to which they had become accustomed. Badgered by the investors, hounded by those from whom they had purchased “safe passage” and unable to feed their own fancies, many of them will take to criminal activities in which they will be joined by some who have lost their life’s savings and the petty musclemen who were till the other day employed by the Fund owners.
“What is frightening is the manner in which a wide section of the population (that includes investors and agents alike) believes that the principal protagonist in the fiasco is but an extension of a political party. As the nexus between some prominent politicians and the defunct organisation surface with regular monotony, these misguided young men and women are according themselves a kind of “trickle down legitimacy” – if the high and the mighty can err on the wrong side of the law and are shielded (read protected by the powers that be), why can’t we take things for granted – being their common refrain.”
“These are terrible days for the state” lamented a prominent industrialist who does not want to be identified. “Between now and the Puja’s will be a crucial period for Bengal, people who did an ostrich (all the while lining their pockets) when these funds were mushrooming cannot abdicate responsibility or play to the galleries by egging investors to claim refunds. Everybody knows that it is not possible for these companies to refund all the monies in the short run and will only force even the relatively healthy to the brink. If this happens, with politicians of all hues trying to fish in Sarada-sullied waters all hell will break loose.” But the real fear is not from the funds going belly up – it is from the tens of thousands of agents who will be forced by desperation to take up the law in their hands. This in the context of political turmoil and an abject lack of economic opportunities has already made the state a tinderbox waiting for the spark.
Veteran politician Somendra Nath Mitra, acknowledged as the whistleblower in the case in point had warned: if unchecked the situation will “lead to a procession of dead bodies”. Let’s hope that the guilty are given exemplary punishment, that good-sense prevail, the impending bloodbath and descent into chaos is averted.
I for one am willing to smoke more cigarettes, for the sake of my motherland. At least the smoke won’t be from charred dreams and dead bodies.