Eastern states need institutional reforms to avoid Saradha-like scams

The Saradha Ponzi scheme, which collapsed last year leaving thousands of people in the lurch in Bengal, Jharkhand, Assam and Orissa, is now being investigated by the CBI. The BJP government at the Centre sees this as a stick to beat the Trinamool Congress (TMC) in Bengal. Several high-profile arrests have been made, including that of a senior retired police officer in Kolkata, who was associated with Saradha, which once comprised over 200 companies dealing with things as diverse as financial schemes, media and real estate. The BJP obviously hopes to make political capital from the Saradha affair. But it is doubtful whether these investigations will end in conviction for many of the accused. Much of the evidence is based on hearsay and many of the alleged transactions were in cash, which is nearimpossible to trace. And, there is little chance that those who were duped will ever get their money back.

It is impossible to predict the political trajectory after these investigations. The BJP has already doubled its share of votes in Bengal to 17 per cent. It also managed to win two Lok Sabha seats in 2014. Yet, its organisation is weak compared to that of the TMC or even the depleted Left or Congress. Both these opposition blocs have teamed up against the TMC on the Saradha issue and are agitating noisily against the Mamata regime. But step away from the political noise, and it is easy to see that all the eastern states need institutional reform. They have a severe shortage of formal banking and financial institutions. That makes people easy dupes for Ponzi schemes that promise fancy returns, only to deceive. State and central governments need to put their heads together and take financial inclusion to eastern India, using modern technologies like mobile banking and direct cash transfers.