The rise of Saradha Group and its Chief Sudipta Sen and their subsequent fall read almost like a celluloid script. The story reiterates the entrepreneurial malaise that had historically set in the Eastern India. The reach of the group was not limited to West Bengal alone, it extended to other states, all part of old Bengal Presidency. Long before the Saradha Group emerged in the firmament of the east, several fraud organisations, masquerading as legitimate, non-banking financial institution, had duped gullible depositors of millions of rupees. In particular, there were two organisations, which gained notoriety with maximum reach and loot — Sanchita in Bengal and JVG in united Bihar. Not only lakhs of families, ironically most from the lowest strata, were defrauded, but even the law and order situation in the respective states was threatened by the foot soldiers of these organisations, after the organisations had bursted. Apart from the much publicised names, many small level operators, operating at district or blocks levels, routinely duped the customers, in the absence of an authentic regulatory authority.

One cannot but ask why these types of organisations generally flourish in the eastern, northern and part of the Hindi Heartland states. One possible reason is that, in the absence of an 'equity culture', generally associated with entrepreneurship and industry, promise of astronomical return from deposit, holds a tantalising alternative in these regions. The non-banking deposit organisations, therefore, are able to play on the sentiments of the people's greed for high returns, where economy is nearly stagnant, largely due to the absence of an incentive structure in the society. This is an quite contrast to the story of Harshad Mehta, who will go down in history as a great scam star of stocks; after all, he did not disadvantaged the small equity holder. His inside trading leading to artificial spurt in share prices had indeed made him a cult figure. His iconic status could be gauzed from the fact that, along with Ganpati, he used to be worshipped in the slums of Bombay. While Dhirubhai Ambani democratised capitalism, by holding meeting of the shareholders  in the stadium, Harshad Mehta elevated the equity culture to a mass movement, in the western enclave of India. Thus, even when Harshad Mehta's scam was first detected, with limited aberrations, stock exchange in Bombay continued to function, and there was hardly a setback in the Indian industrial capitalism. Some head did roll, who were accomplice of Harshad at the highest pedestal, but the Indian economy did not face much tremor. So it is not at all surprising that Gujarat and Maharastra  even  now continue to be the states with the highest number of stock brokers in the country, as well as the highest viewership of CNBC channel (to keep track of equity).

In contrast to eastern India, the development of equity culture in the western and southern India has a long historical tradition. The anti-Brahmin movement, long before independence, not only triggered regional identity, but followed it up with the capitalist transformation and industrialisation. Apart from the ideology of social justice, the nascent capitalism thrived there on the native banking institutions and the stock exchange. For example, Sahujee Maharaj in Maharastra part of Bombay presidency, not only scripted the anti-Brahmin movement at one hand, but laid the foundation of sugar co-operatives on the other. To support the socio-economic development, D.R. Gadgil did not remain just an esoteric economist, but worked out the nuts and bolts of co-operative movement, from the premises of Ghokle Institute in Pune. Later, when Bombay Presidency was split into Maharasta and Gujarat, Y.V.Chavan in the former and Morarji Desai in the latter, created the massive structure of industrial capitalism in the respective states. Similarly, Kamraj brought about change in the industrial spectrum of Madras presidency. He exhorted the Nadars and other marginal social groups to go for entpreneurship. The capitalism could be funnelled through the institution of stock exchange and native sponsored banks, which were in existence in south and western India.

Similarly, the role of Andhra Bank in the Andhra Pradesh segment of Madras presidency was part of the folklore of industrial turnaround in the state. Promoted by Pattabhi Sitaramayya, Gandhijee's nominee for Congress Presidentship who was defeated by Subhas Bose, built the bank assiduously to lay the foundation of capitalism in the state. Even now when the Chairman of the Andhra Bank decides to visit rural areas of Andhra Pradesh, he is beseeched by thousands of entrepreneurs and industrialists with open hand, because bank had helped in building their empires, small or big. The rice, tobacco and film industry in Andhra Pradesh could not have reached their massive proportion without the credit support of the Andhra Bank. The bank officials privately tell with pride that GMR, a first generation entrepreneur, is their creation.

In the old Bengal presidency, even though 'Swadeshi Movement' started in 1905, it could not initiate authentic capitalism in the region. Some commercial and industrial enterprises did start, some initiated by the Tagore family, but it could not inculcate the equity culture in the absence of investment opportunities. Unlike in south and western India, the investment avenues in the east were limited, because Bengal presidency was the first seat of British colonialism. The massive deindustrialisation and the land tenurial system of 'permanent settlement' together aborted all possible of scope for industrialisation. In the post-independence period, the 'freight equalisation' was the last nail in the coffin of entrepreneurial development in the east. Surprisingly, while 'Swadeshi Movement' failed to galvanise enterprises in the Bengal presidency, it mobilised massive stock buyer of Tata Steel Company in its Bomabay office. The Swadeshi movement was an economic agenda to oppose the political plan of Lord Curzon to divide Bengal. The movement succeeded, its political gain accruing to Bengal with the move for partition aborted, but its economic gains were reaped by the western India.

In Bihar, inspite of the preponderance of feudalism, there was a brief moment of silver lining when Swami Sahajanand, the great peasant leader, exhorted the farmers to buy share in the Bihta Sugar Mill, which had illustrious board members like Rajendra Prasad in the late thirties. The sugar industry in Bihar had sterling records, but was weakened later with ‘freight equalisation’ and other economic fetters. Even the establishment of ‘Magadh Stock Exchange’ in the early nineties could not change the industrial culture. The Exchange got closed soon after its birth, unsung and unwept, after acrimonious fight within the organisation. The vacant space of equity and formal banking, was captured by deposit organisation with a promise of astronomical return. In Bengal, Saradha Group mobilised several thousand crore, and appeared to be on the threshold of an economic turnaround in Bengal. With the open patronage of the ruling party, Saradha Group almost appeared to be a government sponsored organisation. Leaders who opposed the Tata industrial venture in Singur, generously deposited money in the Saradha Group, in anticipation that road to economic resurgence in the state will be through the deposit organisation. Saradha had almost acquired the profile of Reliance Industries in Gujarat, where its high stock ensures not only feel good factor but also political continuity. It is now reported that with the busting of the Saradha, the ruling party is hesitating to go for ‘Panchayat’ election. Somehow, in West Bengal, equity, industrial and capitalist culture has been in retreat for long, with real estate and deposit organisations occupying the economic space. Though real estate may have created value, but deposit organisations have created financial havoc. If the market economy has to succeed in the eastern region, the culture of Weberian capitalism will have to be promoted. 
       

* Member Secretary, Asian Development Research Institute (ADRI), Patna