Ear to the ground

Why small businessmen in Gujarat are quitting industry and turning to financial speculation

Returns are collapsing for micro, small and medium industrial units.

Two major trends are playing out in Gujarat’s economy.

On one hand, small industrial units are shutting down. This is not a recent development. Micro, small and medium units in the state started getting into trouble about five years ago, well before the central government demonetised high-value currency notes in November and introduced the Goods and Services Tax in July. As Scroll.in reported from Surat, several factors were at work – rising imports from China, the entry of bigger players with greater economies of scale, and government policies such as import duties that favoured bigger companies over smaller ones.

On the other hand, financial investments have boomed in Gujarat. Two years ago, a sharebroking firm in Rajkot, Marwadi Shares, was adding about 1,000 new customers every month. That is now up to 6,000 new customers a month, said Ketan Marwadi, its managing director.

Data for the last five years shows the state’s people are investing more in fixed deposits, mutual funds and small savings accounts.

Businessmen in the state say the two trends are related – an industrial slowdown is leading to a rise in financial investments.

A broader national trend

This mirrors what Scroll.in’s Ear To The Ground project has found in other states. In Punjab, Odisha and Tamil Nadu as well, businessmen were putting their money into speculative schemes instead of factories.

In Punjab, businessmen diverted working capital loans for their sinking businesses to land purchases. In Odisha, earnings from the state’s iron ore boom were funnelled into gold, real estate, apartments, education and chit funds. In Tamil Nadu, moneylending appeared to outperform more productive enterprises in terms of returns.

If this trend is widespread, it indicates that micro, small and medium enterprises are not able to generate satisfactory returns.

A good starting point is to compare relative returns from investments in industrial activity and financial instruments. That said, calculating economic returns of micro, small and medium enterprises is not easy. Most data on the financial performance of India’s corporate sector focuses on the country’s top 500 companies.

But even that data is a starting point. Between 2013 and 2017, returns have fallen even for larger companies. Sashank Vipparthi, a portfolio manager in an investment firm in Hyderabad called Impact Consulting, calculated Return On Capital Employed – a metric used to measure companies’ profitability – for the top 200 companies listed on the National Stock Exchange. He found that it had fallen from 28% to 14%. As the chart below shows, no more than 10% of these companies yielded returns above 20%. As many as 52% posted negative returns in this period.

What about micro, small and medium enterprises? “My guess would be if large companies are doing badly, they must be doing worse,” said Vipparthi. That is because smaller companies are more vulnerable to market swings.

Why is business profitability falling? The fundamental problem, he said, is lack of growth in domestic demand. This has created an outcome where, according to S Ananth, a researcher based in Vijayawada who studies India’s financial markets, companies are sitting on unused capacity, margins are falling and profits are under pressure.

The fallout? Even large companies, said Vipparthi, are investing in financial instruments. Investments in the stock market, directly and through mutual funds, are giving annual returns above 20%, he said. In contrast, industries are generating returns of about 11% and debt instruments such as bonds and debentures are yielding around 6%-7%.

What is happening in Gujarat?

Much of this is playing out in Gujarat as well. When key industrial sectors such as textiles, metal products, automobiles and chemicals suffer a slowdown, small enterprises supplying to them also struggle. A slowdown in demand is not the only factor weighing them down, though. Take Surat. The textile cluster is under pressure from Chinese imports and the entry of larger companies, both of which are putting margins under pressure. This feeling of insecurity has been exacerbated by demonetisation and the GST, resulting in many units shutting down.

Dhirubhai Shah, managing director of Shahlon Industries, a company in real estate and yarn manufacture, has a dire prognosis for Surat. At this time, he said, “Surat has 700,000 looms operated by 10,000 companies. In five years, that will come down to 2,000 companies. We have 400-500 companies in processing. We will see similar consolidation there as well.” In other words, competitive advantage is moving towards a few larger units.

The outcome, said KK Kakhar, former head of economics department at Rajkot’s Saurashtra University, is growing crisis of confidence among businessmen. As economic uncertainty increases, he said, businessmen are moving to financial speculation. “Financial capital is giving better returns than production investment,” he said.

Ananth sees parallels between the present situation and the one India experienced in 1993-’97 when, as their businesses went into a slump, a generation of businessmen moved their savings into the stock market. “It keeps happening when people find margins wiped out and simply take money to speculation in the stocks or commodities,” he said. “I think we are seeing signs of this.”

What has changed is where this money is going.

Money talks

About 10 years ago, people in Gujarat had a range of investment vehicles to choose from – land, stock market, bank savings, gold, day trading, moneylending, informal exchanges for commodities and stocks (known as dabba trading) and more. Some of these were used to park and grow black money. “Before demonetisation, 50%-60% of the people used to put their money into real estate,” agreed Marwadi. “That is also where do number ka paisa used to go.”

That range of investment options has shrunk. Land is not as attractive. In the urbanising belts around Rajkot, property rates have been stagnant for the last two years (more on this in a subsequent report). At the same time, as Marwadi said, demonetisation has made people more wary of investing in land, property and gold. Because of crackdowns by the Securities and Exchange Board of India, money flows into dabba trading have slowed as well. From talking to people in the state, it seems the only informal instrument that is still sizeably used is moneylending.

In the old days, Gujaratis used to invest in both formal and informal instruments in order to hedge risk. Now, most of the money seems to be going into financial instruments such as stocks and mutual funds. This rush into the stock market creates its own impetus – by feeding into the markets’ bull rally, and attracting even more investment. This can get risky.

What happened in 1997 was a stock market bust, followed by one generation of investors posting losses and swearing off the markets for good. They had entered not as long term investors but as speculators. Which is what is happening again – with a new generation of investors.

“They will want to make money at the end of their trades,” said a sociologist who did not want to be identified. “And all the bets are not going to pay out. And they do not have the bandwidth to lose money.”

MS Sriram, who teaches at IIM Bangalore’s Centre for Public Policy, cautioned: “If people are moving out of the primary sectors to the financial services sector, it is a cause for concern. Financial services come in only when there is enough production and economic activity.”

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Swara Bhasker: Sharp objects has to be on the radar of every woman who is tired of being “nice”

The actress weighs in on what she loves about the show.

This article has been written by award-winning actor Swara Bhasker.

All women growing up in India, South Asia, or anywhere in the world frankly; will remember in some form or the other that gentle girlhood admonishing, “Nice girls don’t do that.” I kept recalling that gently reasoned reproach as I watched Sharp Objects (you can catch it on Hotstar Premium). Adapted from the author of Gone Girl, Gillian Flynn’s debut novel Sharp Objects has been directed by Jean-Marc Vallée, who has my heart since he gave us Big Little Lies. It stars the multiple-Oscar nominee Amy Adams, who delivers a searing performance as Camille Preaker; and Patricia Clarkson, who is magnetic as the dominating and dark Adora Crellin. As an actress myself, it felt great to watch a show driven by its female performers.

The series is woven around a troubled, alcohol-dependent, self-harming, female journalist Camille (single and in her thirties incidentally) who returns to the small town of her birth and childhood, Wind Gap, Missouri, to report on two similarly gruesome murders of teenage girls. While the series is a murder mystery, it equally delves into the psychology, not just of the principal characters, but also of the town, and thus a culture as a whole.

There is a lot that impresses in Sharp Objects — the manner in which the storytelling gently unwraps a plot that is dark, disturbing and shocking, the stellar and crafty control that Jean-Marc Vallée exercises on his narrative, the cinematography that is fluid and still manages to suggest that something sinister lurks within Wind Gap, the editing which keeps this narrative languid yet sharp and consistently evokes a haunting sensation.

Sharp Objects is also liberating (apart from its positive performance on Bechdel parameters) as content — for female actors and for audiences in giving us female centric and female driven shows that do not bear the burden of providing either role-models or even uplifting messages. 

Instead, it presents a world where women are dangerous and dysfunctional but very real — a world where women are neither pure victims, nor pure aggressors. A world where they occupy the grey areas, complex and contradictory as agents in a power play, in which they control some reigns too.

But to me personally, and perhaps to many young women viewers across the world, what makes Sharp Objects particularly impactful, perhaps almost poignant, is the manner in which it unravels the whole idea, the culture, the entire psychology of that childhood admonishment “Nice girls don’t do that.” Sharp Objects explores the sinister and dark possibilities of what the corollary of that thinking could be.

“Nice girls don’t do that.”

“Who does?”

“Bad girls.”

“So I’m a bad girl.”

“You shouldn’t be a bad girl.”

“Why not?”

“Bad girls get in trouble.”

“What trouble? What happens to bad girls?”

“Bad things.”

“What bad things?”

“Very bad things.”

“How bad?”


“Like what?”


A point the show makes early on is that both the victims of the introductory brutal murders were not your typically nice girly-girls. Camille, the traumatised protagonist carrying a burden from her past was herself not a nice girl. Amma, her deceptive half-sister manipulates the nice girl act to defy her controlling mother. But perhaps the most incisive critique on the whole ‘Be a nice girl’ culture, in fact the whole ‘nice’ culture — nice folks, nice manners, nice homes, nice towns — comes in the form of Adora’s character and the manner in which beneath the whole veneer of nice, a whole town is complicit in damning secrets and not-so-nice acts. At one point early on in the show, Adora tells her firstborn Camille, with whom she has a strained relationship (to put it mildly), “I just want things to be nice with us but maybe I don’t know how..” Interestingly it is this very notion of ‘nice’ that becomes the most oppressive and deceptive experience of young Camille, and later Amma’s growing years.

This ‘Culture of Nice’ is in fact the pervasive ‘Culture of Silence’ that women all over the world, particularly in India, are all too familiar with. 

It takes different forms, but always towards the same goal — to silence the not-so-nice details of what the experiences; sometimes intimate experiences of women might be. This Culture of Silence is propagated from the child’s earliest experience of being parented by society in general. Amongst the values that girls receive in our early years — apart from those of being obedient, dutiful, respectful, homely — we also receive the twin headed Chimera in the form of shame and guilt.

“Have some shame!”

“Oh for shame!”




“Do not bring shame upon…”

Different phrases in different languages, but always with the same implication. Shameful things happen to girls who are not nice and that brings ‘shame’ on the family or everyone associated with the girl. And nice folks do not talk about these things. Nice folks go on as if nothing has happened.

It is this culture of silence that women across the world today, are calling out in many different ways. Whether it is the #MeToo movement or a show like Sharp Objects; or on a lighter and happier note, even a film like Veere Di Wedding punctures this culture of silence, quite simply by refusing to be silenced and saying the not-nice things, or depicting the so called ‘unspeakable’ things that could happen to girls. By talking about the unspeakable, you rob it of the power to shame you; you disallow the ‘Culture of Nice’ to erase your experience. You stand up for yourself and you build your own identity.

And this to me is the most liberating aspect of being an actor, and even just a girl at a time when shows like Sharp Objects and Big Little Lies (another great show on Hotstar Premium), and films like Veere Di Wedding and Anaarkali Of Aarah are being made.

The next time I hear someone say, “Nice girls don’t do that!”, I know what I’m going to say — I don’t give a shit about nice. I’m just a girl! And that’s okay!

Swara is a an award winning actor of the Hindi film industry. Her last few films, including Veere Di Wedding, Anaarkali of Aaraah and Nil Battey Sannata have earned her both critical and commercial success. Swara is an occasional writer of articles and opinion pieces. The occasions are frequent :).

Watch the trailer of Sharp Objects here:


This article was published by the Scroll marketing team with Swara Bhasker on behalf of Hotstar Premium and not by the Scroll editorial team.