Rise Of The Moffusil Millionaire

...it was the season of light, it was the season of darkness, it was the spring of hope, it was the winter of despair.

­—A Tale of Two Cities, Charles Dickens

The tale of two cities played out, as if on cue, in India over the past eight years. Across swathes of rural landscape, and in the metros, cities and towns, economic life was hell. The GDP slowdown in the last two years of the UPA-2 regime was followed by the demonetisation decimation in 2016. The half-baked imposition of the GST regime, instead of transparency and fairness, disrupted and wrecked the huge informal sector. This phase led to another downward GDP wave.

The viral attack unlocked an unimaginable period of unprecedented negative growth rates. Can you imagine a GDP contraction by 24 per cent, even if it was during a quarter? It was as if the devil himself had appeared in the form of a virus, and permeated the business world with his satanic hues and contours. Entrepreneurs entered into varying forced Faustian pacts to either ­re-emerge with new fame, wealth and power, or somehow retain what they had in the past.

Yet, in small-town India, in the Tier-2 and Tier-3 cities, there were flashes that released intense entrepreneurial energy. In a bizarre cold-fusion manner, there were implosions that sent ­radiations that enabled the ­economy to sizzle in unique ways. Apart from ­desperate folks with their backs to the walls, the unending crises in the ­previous ­decade of this century, believe it or not, ­offered openings to the risk-takers destined to ­triumphantly emerge as Mofussil Millionaires.

They battled the odds, grabbed the few opportunities that came their way, thought out of the box, and took ­advantage of the changed social, ­economic and political milieu. When they began their business journeys, ­little did they know that they were ­fortuitous; they came to the right places, in the happening segments, and at the most auspicious time. Many were forced to do so, others found themselves in serendipitous ­circumstances, and a few made ­deliberate moves.

• Amit Kumar, who is now in late ­thirties, ran a plastics-cum-steel ­utensil shop in Patna’s Chitkohra Bazaar, which is more than a century old. In 2018, he realised this was the end of the business road as sales ­plummeted, and margins vanished. He had little options. So, when ­e-commerce major, Flipkart, urged him to join its sales platform, he jumped in without fear and thought. New Dadaji Steel House now ­showcases 20 brands and 1,200 products (appliances, books and garments) that are sold across the country.

• In 2015, an earthquake shook parts of north India. It shattered the life of Varanasi-based Vikas Mishra, who had just started his venture, Trip to Temples, to arrange pilgrimages to Kailash Mansarovar in the Himalayas. Pilgrims cancelled their bookings. But the politico-social winds were in his favour. The tremors were temporary; India was in the midst of a boom in temple-and-pilgrimage tourism. By 2019, his annual turnover was Rs 20 crore, and he competed with the likes of Cox and Kings, Thomas Cook and SOTC. One of the three firms offered to buy him out.

• Seven years ago, Karan Pal Singh Chauhan, 43, and Vivek Parmar, 45, consciously quit their cushy, comfortable and well-paid jobs. The former worked with the country’s largest law firm, and the latter was based in the UK and the US with India’s largest BPO. They came back home (Shimla) to chase a dream against the wishes of families and friends. Before the ­pandemic, 31 Parallel, a BPO they ­co-founded, chalked up an annual turnover of Rs 12 crore. It works with leading travel and hospitality clients. It recruits professionals who wish to return to their native place.

The Services E-Bug

Despite the differences in their backgrounds and the segments they operate in, there is a distinct similarity between the four businessmen. The inf­ectious entrepreneurial germ that they caught, call it the e-bug, led them into the services sector. Not manufacturing, and not farming. The reasons are counterintuitive. The series of ­recent churns had negative and seismic impact on agriculture and manufacturing. This is reflected in the current state of farmers and MSMEs.

According to the Economic Survey (2019-20), which focussed on wealth creation, entrepreneurship took off in the recent past. The cumulative annual growth rate in the number of new firms in the organised sector jumped more than three times to 12.2 per cent in the 2014-18 period, compared to the 2006-14 one. Keeping aside the ­political overtones of this comparison, and the convoluted periods, the ­number of new firms jumped from 70,000 in 2014 to 1.24 lakh in 2018.

What is significant is that the spurt was driven by the services sector. Since 2015, while the annual figure for new firms doubled in this category, there was a dip in the numbers in the case of agriculture, and a plateau in manufacturing. Services accounted for more than two-thirds of the firms formed in 2018. The Survey states that such facts reflect “India’s new economic ­structure, i.e. comparative advantage in the Services sector.” It is the new pathway to the riches.

Entrepreneurs explain why this is so. The usual entry barriers in businesses, such as high capital costs, huge ­manpower needs and excessive ­marketing spend are absent. “Trading is the best bet. I don’t need a credit line, and don’t incur large investments and infrastructure expenses. The logistics is provided by the e-commerce platforms through which I sell. There are many challenges in manufacturing; in comparison, trading is a smooth sail,” explains Patna’s Amit.

When his father died in 2010, Harish Dharamdasani, a dropout after Class 10, sold the family’s tiny shoe shop in Malpura village, Tonk district, Rajasthan, and came to Agra. As a door-to-door shoe salesman, he earned a monthly salary of Rs 6,000. One day, one of his suppliers taunted, “Why don’t you get into business if you think it is easy?” He did. He had no money, but enjoyed goodwill among a few manufacturers. The latter sold the shoes on credit, and Harish stocked them in his house.

Five years later, Harish clocks an ­annual turnover of Rs 20-30 crore, and employs 30 people directly, and 600 indirectly since he acts as a middleman too. He has his own brand of shoes, Lyasa, which is largely sold through e-commerce platform Flipkart. “I need a GST and small inventory. The platforms provide marketing, advertising and warehousing support,” he says. Obviously, the advent of technology was a boon for both Amit and Harish in their respective voyages.

Natural Entrepreneurs

From AD 1 to 1,700, India and China accounted for more than two-thirds of the wealth generated globally. The Survey (2019-20) states, “Economic dominance over such long periods manifests by design and not mere chance.” Traditionally, since ancient times, Indian philosophical texts “commended wealth creation”. The colonial and socialist legacies dented this mindset. The 1991 reforms freed these animal spirits. Today, despite the business traumas, they are pervasive.

In 2018, the Amway Global Entrepreneurship Report concluded that 91 per cent of the surveyed Indians wished to start a new business, and 74 per cent felt that they had the inherent traits to become successful. No one, neither families nor friends, could dissuade them from this path, said 78 per cent of the people. In terms of the Overall Entrepreneurial Spirit Index, stated the report, India ranked second, behind Vietnam, but ahead of China, Germany, the US and the UK.

When one looks at the entrepreneurship universe in the country, the maj­ority are first-generation owners, and almost everyone—99 per cent, as per a 2008 study by the National Knowledge Commission—did not want to be in regular jobs. In the past decade or two, there has been an inherent urge and desire to be one’s own boss. It is prevalent among both men and women, and especially among the younger people. The recent slowdowns and Covid-related job losses accentuated them.

Faced with minimal alternatives—no jobs and steep salary cuts—many Indians decided to venture out on their own. Like Karan Pal and Vivek, the co-founders of 31 Parallel in Shimla, Bhupendra Patel, the 35-year-old MBA, quit his retail job after seven years. “It wasn’t my cup of tea. It was the same routine with no challenges or scope to experiment,” says Patel. He started a crockery shop, which flopped. Egged on by his enthusiastic wife, he got into home furnishings in 2015.

The first two years were tough; the couple barely managed to cover their input costs. The growth came in the third year, and the business zoomed by 350 per cent in 2019-20. In the first three quarters of the Covid year, 2020-21, the revenues grew by more than 100 per cent. Possibly, as people stayed at home, they spent a part of their free time to re-do the interiors of their houses. Based in Panipat, the couple, through their brand, Home Sizzler, ­offers 400 designs of curtains.

Like the Agra-based Harish, Trishneet Arora of Ludhiana and Narendra Sen of Bhopal are school dropouts. As a child, Trishneet was a geek who hovered around computers and felt that fancy degrees and formal education weren’t meant for him. In 2010, as a teenager, he got his first gig—ethical hacking for Avon Cycles for a sum of Rs 5,000. Narendra was even more dismissive of studies; as a student, he earned Rs 2 lakh a month by designing and ­launching websites for clients.

Quite early in life, Trishneet knew that data protection was the next big thing. The 27-year-old caters to ­clients such as Punjab Police, Reliance Industries and the Election Commission. His company, TAC, is a cyber security advisor to the US ­government, and hopes to reach an annual turnover of Rs 2,000 crore by 2022. Narendra made a play in data storage. Founded in 2013, RackBack Datacenters has 3,200 servers in 35,000 sq ft, and will invest Rs 6,000 crore in the next few years.

Mofussil Mansions

As we talk about these small-town ­millionaires, and billionaires, the one question that crops up is: why did they base themselves in such unlikely ­locations? Imagine a BPO in Shimla, data protection and storage firms in Ludhiana and Bhopal, and home ­furnisher in Panipat! Doesn’t make sense, does it? It seems weird that these real business castles and mansions were built in smaller towns and cities. As usual, there are both macro and micro reasons for this trend.

When the Survey (2019-20) mapped the distribution of new firms across districts—remember, most are in the services sector—it found a curious anomaly. “We find that though the peninsular states (below the Deccan plateau) dominate entry of new firms, entrepreneurship is dispersed across India, and is not restricted to a few metropolitan cities,” it states. Hence, business activity has percolated bey­ond the larger cities and deep into the smaller places across most districts.

In addition, new owners gain from low costs of living in smaller towns, which now have the same infrastructure (highways, electricity, mobile ­coverage and broadband) as the larger ones. The real estate prices are cheaper, and so are rentals. The same is true of manpower. This enables small-town millionaires to be more competitive, and offer better rates, than those based in the larger cities. As long as quality, deadlines and ­efficiency are ensured, this helps to grab global clientele.

Don’t forget the extended social ­support system that exists in the small towns, which are sometimes the ­entrepreneurs’ home-towns. Meet 30-year-old Sandip Kathiriya from Surat. His parents live in a ­village, and are farmers. Sandip began with four employees, and did the stitching and finishing jobs for local apparel ­makers. After eight years, he launched his brand Navlik on Amazon. His wife, a fashion designer, joined him ­because they had an emotional ­network in the city.

Last festive season, September-October 2020, in the midst of the viral rage, he sold goods worth Rs 2 crore, which was a four-fold jump from the previous year’s ­combined sales of Rs 50 lakh. He laughs at the realisation that he is now a confirmed millionaire, and adds, “It was during Covid that our sales crossed the 10-million mark.” Amit’s wife, Shilpi Kumari, is his business partner in the shoe ­business. Others too get support from families and ­relatives, as and when they need it.

The action, clearly, is somewhere out there, away from the radars that focus on the larger cities. As India stumbles out of the current economic malaise—hopefully, it is sooner than later­—it is Mofussil India, and not Metro India, which will prove to be the future ­engine of growth. As connectivity, whether physical (roads and airports) or virtual (spectrum and signal), ­improves, the small towns will be the new cradles of wealth. The riches will be inclusive, not exclusive.

By Jyotika Sood in New Delhi, Shamsher Singh in Bhopal, Ashwani Sharma in Shimla and Harish Manav in Chandigarh