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Dialogue between Rajiv Malhotra and Prof. R Vaidyanathan- Part B; Benefits Of Jati System
 
Nadars and Gounders are the two castes which went into business. Nadars were considered slightly above scheduled castes somewhere in the 40s. Today, they are extraordinarily powerful in business.

By RAJIV MALHOTRA




Rajiv: Okay, so you mentioned the benefits of caste system are credit, market access and risk mitigation. Are there other aspects also?

Prof: Yeah. Risk mitigation, credit, market access and setting them up.

Rajiv: But weaknesses. They are not being acknowledged. Does this make you closed because you are only interacting with other people within the same community? So if somebody in China made a breakthrough, you don’t even know about it, you don’t worry about it, you think we are safe. Does it give you a false sense of security?

Prof: I would not say that because we did mention about China. Interestingly, Sivakasi is a place in Tamil Nadu where Nadar community is one of the major business controlling groups. Two of their brothers went to China. And then they heard how these crackers are manufactured and used in China for their festivals etc. They came back, imported some machinery from China and set up their business.

Rajiv: So we’ll do some investigative work on competition and bring a lot of innovation.

Prof: Yes. Quite a lot. For instance, Tirupur is one of the major suppliers of knitted-wear to such a highly competitive market like Europe. Again, they started with ordinary “baniyan”(vests) etc. but they have moved far ahead. They are good learners. Actually, it’s an agricultural community, theGounders are not a business community from the beginning like Marwaris. Similarly, the drilling for water – you may be surprised that today in Rajasthan and Madhya Pradesh, water drilling is done by the community from Sangergiri. These are the people who do drilling.

Rajiv: So, could another advantage be, they protect the intellectual property secrets because of whatever techniques they know. The fishermen in Nagapatnam, they told me that this particular group of fisherman can go to deep sea and they have fishing boats for that. This other group goes into shallow water and they don’t compete.

Prof: Correct.

Rajiv: They don’t compete and they have secrets of where the fish will be etc., so they have collective advantage over other people. They have trade secrets.

Prof: Most important according to me, if you look back at the post-independence period, the caste which entered into business has done extremely well. I’ll give you Tamil Nadu as an example,Nadars and Gounders are the two castes which went into business. Nadars were considered slightly above scheduled castes somewhere in the 40s. Today, they are extraordinarily powerful in business. They are numerically smaller, but very powerful as a business community in retail trade, in matches, in transport. On the other hand, two communities went full-fledged in politics –Thevars in the southern part of TN to which Sasikala belongs, and the Vanniyars in the northern belt from whom PMK (a political party) emerged. These two groups went full-fledged into politics. But they have not succeeded as much as those two that went into business because politics has got its own limitations. They ask for reservation etc., but beyond a point they are not able to leverage and benefit their community people. I asked the leader of Vanniyars that why did you not start a bank?

Rajiv: Right!

Prof: You have so many IAS officers, bankers, judges in your community. He told me – frankly, it never occurred to us. I told him that is how you have to leverage. Gounders have done that, Nadarshave done that. And the second point is, everybody talks about child-labour etc. – you go to Sivakasi, the belt where Nadars are powerful, the number of educational institutions density-wise is highest in Bharat in that location. Every 100 meters, you’ll find some school and college. Periodically, these NGOs or our friend Sathyarthi’s younger brothers in Tamil Nadu, who want to ‘liberate’ these children, talk about child labor; and this topic comes up only during Diwali or Pongal, not all through the year! But this is not true.

Rajiv: So, what is the system today, have they been threatened by foreign…?

Prof: Substantially…the problem is, people don’t discuss this issue. Where is the level playing field between these groups and the global corporations? Global corporations can borrow something like 1.5%-2% per annum at the global level; in the US maybe 2%-2.5%. These groups, because of our existing credit system, depend mostly on known bank financial companies or money lenders etc., and they borrow at 2%-6% per month.

Rajiv: So, one is that – one disadvantage.

Prof: Secondly, retail trade. They are extraordinary. There are around 4.5-5 crore retail trade outlets in this country. And they are growing. One of the fastest growing areas in Bharat is retail trade followed by restaurants. Believe me sir, retail trade is growing at 8-9% real growth rate in the last 10-12 years, every year. And that is the area where Walmarts and Targets want to enter.

Rajiv: But the government has allowed it.

Prof: Yes! But what I am telling is, Walmarts and Targets are not competing with Bharat’s big businesses. They are actually competing with these people.

Rajiv: So what is happening is, the foreign companies allowed in are not taking on Tatas, Infosys and Ambanis, they are taking on the little guys and finishing them off. And we are blaming that caste system is a Hindu problem, but actually it is a problem that we have created, these guys were doing fine.

Prof: Very fine. Restaurants, for instance. It is one of the fastest growing businesses in the country. Again, it is growing around 9-10%. By restaurants I mean small restaurants, not big hotels – Dhabas, instant foods etc. Now, that is where McDonalds and Pizza Hut want to enter. They don’t want to enter the area where Ambanis and Tatas are already established.

Rajiv: So they have picked where it’s a soft target.

Prof: Correct.

Rajiv: The government has facilitated it. Government is saying we are doing it for GDP growth etc., but that part of the economy is not helping poor people, the grass roots.

Prof: Yes. This FII and FDI – if you look at the data, only 8-9% of our domestic investments come from FII and FDI; 85% comes from household savings. We are one of the highest savers in the world compared to any other country.

Rajiv: And we are sacrificing the real foundation of our society.

Prof: Our own society. These foreign companies are also facing problems – Europe is in crisis, US is in crisis. So European companies find Bharat to be the most attractive proposition.

Rajiv: But may I say it is your fault because you are producing these MBAs. You are producing these people who get MBAs. MBA people have this inferiority complex, they want to become like Americans and be in the good books of the Americans, and so if they can go around the globe saying my GDP rate is so much, my FDI rate is so much, then “I feel very proud, I am not a third-world guy wearing a dhoti, I am now a ‘suited-booted’ guy, I can sit and eat with knife and fork like you guys, I am also pseudo-white.” Does this kind of an inferiority complex cause our people to have this policy?

Prof: Yeah, I would say not only MBAs. MBA is a very good pictorial representation of this phenomenon, but on an average among bureaucrats, judges, the whole Bharatiya middle class is genetically wired to the west.

Prof: Yeah. Since 2006-2007 we have been writing that there was a crisis, nobody believed that. But when Wall Street Journal wrote, everyone believed. So now sometimes I feel that I should stop writing.

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