Lunch with BS: Why Vijay Mahajan's political career never took off

Vijay Mahajan | Illustration: Binay Sinha
Poverty and structural inequality in India in the 1970s was visible quite starkly in Kolkata’s Chowringhee Road where the homeless of the city huddled and begged outside the Grand Hotel, an opulent reminder of the days of the Raj. You had to be particularly insensitive to be unaffected by the plight and the abject poverty of the people you saw and not ask how do we deal with this, says social activist and the pioneer of microlending in India, Vijay Mahajan. Those thoughts in a way defined the path his life would take in the future.

The second defining factor was the fact that he turned 18 when India turned 25. The year 1972, he says, was a time of great ferment in India and even as a student at IIT, Delhi, you couldn’t escape the mood and atmosphere of the times. The day he wound up from his hostel was also the day Emergency was declared in India: June 25, 1975. That effectively put him off a career in the IAS and he moved to Guwahati to work with the sales division of Philips India before moving to the regional office of the company in Kolkata for a while.

We are meeting at The Deck at the India Habitat Centre after over three years of being in touch over email. I had asked him for a Lunch with BS first in 2015 and we eventually meet in 2018. He orders a Caesar salad and a dish of pasta. I order a bowl of rice with spinach and feta falafel, one of the best vegetarian dishes at the recently revamped Deck.

Mahajan found himself at IIM Ahmedabad after a short stint with Philips but by then the development bug had already bitten him. The then IIM Ahmedabad head was Ravi J Matthai who had a similar bent of mind and Mahajan worked closely with him to add a social element to every course offered at the institute back then.

After completing his course he worked at an NGO in Bihar before setting up — with assistance from Deep Joshi who was then at the Ford Foundation — Pradan in 1983. “We were hesitant to join a leftist radical organisation or a Christian missionary but we knew we wanted to work in the area of development,” he explains. Pradan was designed to be a pool of professionals who then become available to do development work. Joshi helped Pradan get its first grant from the Ford Foundation and later quit that organisation to join Pradan.

Pradan began by attacking the core issue: Improving livelihood and income generation. Some early successes gave it a momentum many similar organisations lacked. About 18 ideas were tried out but only three/four took off. Mushroom farming, a backyard poultry farm business and tussar silk farming are three successful ventures he recounts in some detail. Pradan’s tussar silk project became one of its biggest success stories and today accounts for 40 per cent of India’s tussar silk production.

Mahajan — married by then — lived in Bihar for four years and worked on a lift irrigation project with farmers and saw the lives of the Musahar (a rat-eating community) improve severalfold. “Successes like that make the whole experience both worth it and addictive,” he says. The sheer joy of seeing peoples lives change for the better is the biggest thrill for him.

He ascribes the successes of Pradan to team effort and says it demonstrated what could be achieved if one looked at a problem with an engineering mindset, showed the ability to manage and had the humility to seek expert help if one’s solutions didn’t work right away. 

Together they ran Pradan till 1991 and that’s when Mahajan felt he needed to move on. The Mandal Commission report was out and Mahajan was strongly in favour. Even though he himself was male, upper caste Hindu and had a priviledged upbringing, the lack of transmission of opportunities and the inequality all around troubled him. About 70-80 per cent of upper caste children managed to pursue professions that their parents didn’t, whereas for the lower castes, the number was 5 per cent.

This fact bothered him and he found himself knocking on the doors of the Janata Dal for an entry into politics. His political ambition however didn’t go too far. He got a few small jobs, writing the manifesto and so on but soon after the elections were announced, Rajiv Gandhi was assassinated. General chaos ensued and he realised this is not where his future lies.

Always interested in scholarly pursuits, he plunged into a deep study of rural incomes and the severe shortage of credit in rural India. The Ford Foundation gave him a small grant that allowed him to travel to Bangladesh, Thailand and Indonesia to study the Grameen Bank and similar models aimed to resolve the credit constraints of the less endowed. A paper he wrote on this trip got the attention of then Reserve Bank of India governor C Rangarajan, who had taught him in college, and he made a presentation of rural credit and local area banks to then finance minister Manmohan Singh in 1996. Singh assured him that if his party's government were to come back to power, it would use legislation to take the idea forward. His government finished its term but was not re-elected. 

The idea stuck nonetheless. P Chidambaram’s dream budget in 1997 mentioned the concept of microfinance and local area banks. By this time Mahajan had set up BASIX and had sought a loan of Rs 10 million from the Tata Trusts for it. The loan was sanctioned although it had never given a loan in its 80-year history, only grants. They were willing to give him a grant of Rs 10 million but Mahajan insisted on a loan — he wanted to prove the idea of microfinance had potential and to return the loan once he did that successfully. 

Agreeing to what they considered his somewhat absurd request, Ratan Tata’s sister Deanna Jejeebhoy handed him the cheque and told him that their lawyer was certain they would not get the money back but it didn’t matter. But BASIX was to become a bigger success than even he anticipated. Mahajan was able to raise finance from many others and went back a year later to return his loan with a cheque for the Tata Group and a one rupee coin for the lawyer who had argued he’d never repay.

BASIX, which he ran as CEO and later chairman, had many firsts to its credit and became a poster child for microfinance in India, a sector that was to boom and leave many richer and subsequently poorer in the years to come. As late as 2005, BASIX was the first commercial microfinance institution. But once many other players jumped in, several negatives surfaced — the SKS scam broke — and BASIX, like some others, took a sharp hit and went into a spin for many years. 

Post the Andhra Pradesh microfinance crisis, the number of customers for BASIX fell from 3.5 million to around 1.5 million. The story of microfinance in India has been encapsulated in a book he co-authored with Bikram Duggal, Microfinance: From the Fire to the Frying Pan?, published in 2013.

As we order an ice cream with caramelised peaches which we plan to share, Mahajan tells me he’s closed the BASIX chapter — he stepped down as chairman in 2016 and in 2017 “tied up all the loose ends” — but he’s far from done with fixing the inequalities that stare at him. He says each of the stakeholders — the state, the market forces and the civil society — have a role to play and that he is seeking an amendment to the Constitution to this end. He’s concerned about how the civil society has become more and more sidelined while the market institutions and the state have taken on an alarmingly dominant role. He sees it as a huge worry because the inequalities seem to be growing.

To what extent his new role as CEO of the Rajiv Gandhi Foundation will allow him to tackle what infuriates him the most is the moot point. But at 64 and brimming with ideas and energy, I can see he’s not done yet.

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel