Chhatisgarh, Not Vidarbha

April 22, 2009

Girish Shahane has a post up about how the Huffington Post is panicking over a mass suicide of 1500 farmers in Chhatisgarh:

So, the Belfast Telegraph, which presumably has no correspondents in India, picks up a news item from who knows where, and tacks on a misleading headline. The phrase ‘mass suicide’ gives the impression of a co-ordinated, cult-like act. Strangely, London’s Independent, which does have reporters based in this country, picks up the Belfast Telegraph piece. Then, Huffington Post links on its home page to the Independent’s coverage, and carries a blog post by Mallika Chopra, wellness-guru Deepak Chopra’s daughter, based on the unverified story.

(Shoot First, Mumble Later)

I think the figure of more than 1500 suicides comes from this India Together report, or the original statistics it refers:

“The figure is not only for this year, but Chhatisgarh has remained at the top of the list every year since its inception. 1593 farmers committed suicide in the state last year, according to the data provided by state police to the National Crime Records Bureau,” I said. It means 4 farmers die every day by committing suicide. Moreover, Durg is just behind Raipur, which tops the list amongst the districts of Chhatisgarh in this infamous list. Last year alone, 206 farmers committed suicide in Durg. 

(India Together)

So the over-1500 figure was the total number of suicides in a year. The sub-editor who wrote the headline at the Belfast Telegraph made it sound like a mass suicide, and the impression then spread over the internet. It’s his or her fault.

This is not the first time the Irish have made a mess of things. Last year, despite express instructions to deliver a bouquet of flowers on the 8th of October, they did so on the 6th of October.

Anyhow, returning to the point at hand – farmers dying in Chhatisgarh – the India Together report contains this depressing bit:

Santosh, sitting next to him, said “There is a case pending on my land so I can’t get a loan from the bank. I have taken a loan of Rs.13,000 from the moneylender. Lakhnu also borrowed from the moneylender because the land is still in his father Beturam’s name.So the bank did not give any loan to him this time”.

We pompous and heartless libertarians often talk about the right to property, how allowing farmers to sell their land will allow them to get credit, and why it is more important to create industrial employment than to force farmers to remain stuck in agriculture forever. And we have wishful dreams about how if only we could spread libertarian ideas among the people in power and reinstate the right to property things would be better.

Unfortunately, the bit I quoted just now shows that a policy change won’t be enough. Even if the right to property returned, and farmers could sell their land or mortgage it, you’d need a long hard grind of clearing land disputes, rationalising land registration, and making the rural economy independent enough of both agriculture and real estate development that land ownership doesn’t remain as high-stakes as it is. All these are happening, but none of them are happening as fast as is ideal. Whenever there is change, it’s either done on a large but uneffective scale by the government, or on an effective but tiny scale by some madly committed social entrepreneurs.

And then there was this:

He was worried about the loan of Rs.15,000 he had taken from the moneylender. There is an interest of Rs.5 per month on every Rs.100 and he was worried how he would repay it.

The interest rate of 5% a month sounds usurious and provides ammunition to anybody who wants to demonise moneylenders, but let’s look at this in perspective. Indian moneylenders in the Philippines charge 20% a week, and their customers aren’t driven to destitution. In Mexico, Compartamos customers pay an effective interest rate of 100% annually, and the customers are still pouring in and repaying. It’s about interest coverage and gearing, not about how low or high the interest is – look at the subprime borrowers who were defaulting on interest rates of 7 or 8% per annum.

The massive interest rates which the 5-6 Philippines moneylenders or Compartamos charge presumably don’t pinch that much because their customers are mostly urban, and their incomes can’t swing that much. And there’s always the ability to switch to some other sort of casual labour. But in Chhatisgarh, not so much. Not much industry, not much retail trade. 

On that note, I wonder if the lack of opportunities is due to the Naxal tactic of driving out all the “oppressor” employers. The hotspots for suicides – Vidarbha, Andhra Pradesh, and Chhatisgarh are also the ones with a Naxal problem.

So what we have is not just the single sorrow of dying farmers. It’s a tragedy of three wasted opportunities:

  1. The opportunity to enforce law and order and stop the Naxals from running amok
  2. The opportunity to reinstate the right to property, and back it up with a project to clear titles and free land sales and leasing
  3. The opportunity to create a rural financial system that worked

The UPA spent the last five years not giving a shit about any of these, and going by their manifestos and speeches, the NDA doesn’t give a shit either. As Abhishek Bachchan would say, इसे कहते हैं डिमोक्रेसी.

What an idea, sirji.

More on Finance and Inclusive Growth

June 17, 2008

Suddenly, the idea that financial sophistication leads to inclusive growth seems to have caught on (well, except with the Ministry of Finance, which is actually in a position to do something about it). First there was my Pragati piece. Yesterday, Nivirkar Singh’s column in Mint also touched on this:

Petia Topalova of the International Monetary Fund has recently examined the links between policy and inclusiveness of growth. In particular, she uses variation across states as well as three time periods, spanning 1983 to 2005, to examine these links. Inclusiveness is defined as the difference between the consumption growth rate of the poorest and richest 30% Indians.

First, higher financial development, measured either by real credit per capita or by a larger initial share of agricultural labourers with loans from formal financial institutions, is significantly associated with more inclusive growth.


OK, this is interesting. One of the points the Raghuram Rajan report raises is that access to credit is actually only one leg of financial inclusion, and is the most overused one. The other two legs – access to savings instruments and access to risk management instruments like insurance – have traditionally been missing. So there are two ways to read this:

  1. The correlation between credit and inclusive growth doesn’t mean anything. It’s just a coincidence that this turned up, and might be caused by something else – more urbanisation, say, or might even run in the opposite direction – financial inclusion leads to more demand for credit (though I personally think it’s a positive feedback loop – they cause each other)
  2. The research is right. Credit might be only one leg, but it still has an impact. And we haven’t even seen what would happen once savings and insurance also get taken up. In that case, the gap could close in a stunning way.

Moving on. After Nivirkar Singh’s column, there’s also the cover story in today’s Business Standard the Strategist. It’s about FabIndia, and how they’re encouraging artisan communities to set up private limited companies where the shareholding is split between the artisans themselves, their employees, FabIndia, and outside private investors.

The concept, now a Harvard Business School case study, is simple. A fully-owned subsidiary of FabIndia, Artisans Micro Finance, a venture fund, facilitates the setting up of these companies, which are owned 49 per cent by the fund, 26 per cent by the artisans, 15 per cent by private investors and 10 per cent by the employees of the community-owned company.

The artisans gain in many ways. The value of their shares goes up. They earn dividends when the company is in a position to declare them.

The shares offer the artisans a divisible asset class (land can be divided but its divisions are often disputed and jewellery is largely indivisible) and community-owned companies help convert FabIndia’s artisan base into an asset.

“If he wants to get his daughter married and needs money, he can sell his shares and realise the appreciation. He can also take a loan by offering his shares as collateral,” says Bissell.

(the Strategist)

The article is worth reading even if you aren’t interested in finance, and you’re more interested in social entrepreneurship or marketing or traditional handicrafts. Axshully it is worth reading even if you are a metrosexual and only buy organic muesli as you will get to know about new and exciting opportunities to buy it as FabIndia expands.

By the way, William Bissel mentions in the article that the co-operative system imposes too many restrictions on the artisan and the private limited company makes more sense. This is a massive understatement. The legal and accounting procedures for co-operatives in India are so totally broken that co-ops inevitably end up in the hands of regional politicians. That, however, is the subject of another post, and by someone else.

In Pragati

June 4, 2008

I have an article on how finance is actually infrastructure and financial sector reforms out in this month’s edition of Pragati. The link to the article gives you an excerpt and you’ll have to download the PDF version (slightly less than 2 MB) to read the full thing.

The article had a checkered history. I had almost finished researching it when I suddenly had to dash to Delhi. When I returned to Bangalore I fell sick and told Ravikiran and Nitin I wouldn’t be able to write it after all. The fact that I had no furniture in this point and writing would have to be done propped up against a wall may have contributed. Then I came to Bombay where I had a guesthouse with a dsek, and called up and offered to write it after all.

By this time I was five days over deadline and had to write it in a mad rush between ten and two in the morning at my guesthouse. The next day I had to check out of the guesthouse and didn’t have a new one to shift to, so I finished the article between noon and three in the afternoon while squatting in an unoccupied cabin next to an FX dealing room. Sadly, I had finished the bit about currency markets and was writing about financial inclusion and regulation by then.

Anyway, the result of all this was that I wrote the article in practically stream-of-consciousness style. As a result, not only was it a week over deadline, it was 1200 words over the word limit. It is a tribute to Ravikiran’s mad editing skillz that the article is now within the limit and still readable.