If you drive down from Chennai to Pondicherry, it is not unusual to see a furry, beaked head poking out over a high wall, looking quizzically at the world go by the yard in which it lives. The six-feet bird came as an import from Australia and, unknowingly, became a part of a multi-crore scam in Tamil Nadu that defrauded hundreds of thousands of people. Emu farming promised super normal returns – invest in emu chicks, they get fat on your money and are then sold for their meat and oil, doubling or tripling your initial money. Sounds far-fetched? It may to you, but some Rs.500 crore of real retail money bought the scheme. It isn’t as if people only in the south are gullible; 1,600 kms north of Chennai, in West Bengal, an even larger bunch of people at the bottom of the pyramid collected every rupee they could and invested in real estate deals, teak farms and in products as bizarre as potato bonds that offered to double money in a short time. And it isn’t as if it is the rural poor that are gullible, Indians in urban areas have got burnt taking online surveys or trusting their money to a stock guru for multi-bagger rewards. One newspaper report (http://bit.ly/15TnxY8) puts the size of fraudulent deposit-taking schemes just in West Bengal at Rs.70,000 crore. There is no estimate for the size of the problem across the country but we can conjecture that it will be in trillions and not billions.
I must admit I’m a bit surprised by the kind of debate that the Financial Sector Legislative Reforms Commission (FSLRC) Report (http://finmin.nic.in/fslrc/fslrc_report_vol1.pdf) has generated. The 439-page report has made recommendations to re-haul the Indian financial system to facilitate the journey of the $2 trillion Indian economy to becoming a $15 trillion one by 2026. The Justice Srikrishna Commission did not stop at recommendations, but went ahead and drafted law that that will make this happen. The draft Indian Financial Code (http://finmin.nic.in/fslrc/fslrc_report_vol2.pdf) has in it the blueprint of a principles-based, goals-oriented, democratic set of rules that, for the first time, have given consumers their place in the sun. Some of the debate trashes the entire report and calls for a total rethink. I believe this is based on either reading just the dissent notes or a very thin reading of the executive summary. But the conclusions these views come to are quite sweeping. While there may be merit in the argument against some parts of the report or draft law, it does seem a bit odd that instead of trying to correct what is wrong, some would rather throw it all out.
I’m between meetings and while away time at a Barista near IIT. The book I have open is less interesting than the conversation I shamelessly eavesdrop on. Didn’t have to try very hard as the two men who sat less than two feet away are locked up in a world of their own. One seems to be the person with the scheme. The other sounds like the person who will go and sell that scheme. Twenty minutes of hearing high energy hectoring, approach lines, counter questions and a very basic but effective sales pitch and I reluctantly leave the free theatre. These men are obviously practicing a pyramid scheme and person one is prepping person two. The thread that runs through person one’s rant at person two and then of person two to the victim he calls on the phone is this: you’re a loser if you carry on with your low-level life as it is now. You want the big bucks? The good life? To be in the fast lane? Then you need to jump into this scheme. It is only for you. I am your special friend. There is a small window of opportunity open. It will shut. Remember that person? How useless he used to be? Well, now he’s in Mumbai. Drinks everyday at five star bars. And you can’t even afford this coffee you drink that I bought you. Hurry up and sign on.