Good book and for a change with focus on the Non corporate sector. The author teaches Corporate Finance in IIM B, painstakingly, with a lot of data picked from various sources establishes the fact that Uninc,namely partnerships and proprietorships ( P & P ,as he terms them) contribute to more than 45 % of the GDP of the nation whereas the Coroporate sector contributes only around 18 %. In fact , the author further adds that apart from this , agri sector etc which are part of what can be terms the unorganised sector,that is the businesses which are not registered under any of the Govt bodies , either for taxes o for something else , contribute another significant portion.
The author brings out the fact that a disproportionate amount of time , attention ,effort is directed towards the corporate sector leaving the Uninc sector to fend for itself. He goes on to establish that it is this sector , consisting of self employed shopkeepers, people involved in construction,tourism,transport,large amounts of inter mediation who form the very back bone of the economy and have contributed and have been contributing handsomely to the growth of the economy.
He talks of how badly served the sector is , be it credit delivery or the infrastructure or the Govt support. He goes to establish how ,caste based relationships have rallied around the business communities and made arrangements for finance and a support system to further the community's interests. The author establishes that Banks in India extend credit based on assets rather than cashflows, jocularly mentioned by some as "loans to people who have money ".
Developed countries, especially US , the contribution of corporate sector is almost 90% as against the 18% in India , as such aping the Western Model of focusing on the corporate sector would not help in furthering our overall economic interests as per the author.
He has a deep distrust (bordering on bias) of the western model. The author draws upon the past successes of India ,meaning few centuries back, establishes the fact that the model of small time or household entrepreneurship , self employment have in the past been the formula for success and there is every reason for us to stick to that model with some variations possibly to ensure that we not only have overall economic growth but also a vibrant and well taken care of citizens. He repeatedly talks how our economic model is a spillover of our family system.He talks of the fact that the West with the family system under decay , has almost given the full responsibility of taking care individuals whether in old age or sickness or both to the State.
At one level it does make sense. Corporatisation of everything is not a solution. Corporitisation has its uses when there is requirement for large sums but most activities are done at a small level and entrepreneurisation or vaishyaisation as the author terms it is a lot more effective.
Author talks of how the savings rate, at 32-34% plus of the GDP is mostly from the household sector , almost 90 % of the total savings . The author talks how FDI which is just around 10 % of the GDP and is just hyped up in terms of its role in our economy.
The author talks of the futility of trying to ape the West . He talks of how the economic model has to be in conformity or conjunction with the cultural model of the Country.
The point about credit delivery and lack of credit to the self employed groups is strongly emphasised by the author.The author also talks of the need to encourage NBFCs( Non Banking Financial Companies) and the home grown credit cooperative societies and chits which fill in the huge gap left by the Banking system.
He touches upon the social capital of a caste system in India, how caste and community groups engage with each other, form group to fund ,finance and extend help to members belonging to the group to further the economic interests of each other.
The author makes mention of the opaque nature of several NGO s , the fact that they receive funds from religious organisations from abroad and the need to bring in transparency. He talks of how the so called NGO s whidch are for a charitable purposes have 70-80% establishment expenses . Such high establishment expenses negate the very purpose of such NGO s.
The author also talks of religious conversions and how Church establishments of West with the dysfunctional family set up and eroding faith are trying to turn to developing nations to get more people in to its fold by indulging in conversions.
He makes a serious case of not getting carried away with Corporitisation and focusing on helping the small entrepreneurs . This could be the recipe for larger engagement and larger employment base.
The book is not exactly prescriptive , it is rather a one which provides the facts and rationale and nudges the powers that be towards a model which is neither leftist nor a bling market oriented and consumption based economy.
The author does sing paeans of praise on the telecom revolution, on how this has enhanced the business prospects of small self employed people like the plumbers, the cobblers and so on. He renders anecdotal illustrations to establish this aspect.
Repeatedly brings to the fore the futility of just focusing all our efforts on corporates and the organised employees to the exclusion of small entrepreneurs and the self employed which forms the core and the backbone of the country.
