Limited liability could save some Indian lives
PremiumOur pandemic years stood out for a spurt in suicides by businessfolk. Nothing definitive can be said of reasons but the plausible role of debt distress should make us promote LLP ventures
There is no reason to assume that we the living understand suicide. Albert Camus called it the only “truly serious philosophical problem" and echoed Seneca in saying that staying alive can sometimes take more courage than the alternative. While philosophers of every stripe have held forth on the phenomenon and academics have delved deeply into it, perhaps the only unassailable statement we can make is that every case is unique. To impute motives is fraught with folly. Yet, a slice-up of data by the professions of such self-victims could allow meaningful analysis at the aggregate level. Farmer suicides, after all, have been a specific concern in India. For the two pandemic years of 2020 and 2021, however, tallies kept by the National Crime Records Bureau (NCRB) show that more businessfolk took their own lives than cultivators. This defies pre-covid trends. By last year’s count, 12,055 people in business died by suicide, up from 11,716 the year before, while 10,881 individuals engaged in agriculture lost their lives to the same, up from 10,677 in 2020. The category of daily wage-earners logged the biggest toll, with over 42,000 such deaths in 2021, a little above a quarter of the year’s total. Though their source of livelihood need not have any link with how their lives ended, a spurt from four-digit levels does suggest business distress caused by the covid crisis as a plausible factor. In other words, we must not just take note, but also examine the scope for broad intervention.
According to the NCRB database, last year’s suicide cases among people who were in business included 4,532 vendors, 3,633 tradesfolk and 3,890 persons doing something else, and Karnataka, Maharashtra, Madhya Pradesh, Tamil Nadu and Telangana accounted for half of them. Going granular with data, though, is of little help. We need to think in general rather than particular terms. As with farmers, we could work on the hypothesis that suicidal impulses among many are traceable to acute debt, the sort whose burden somehow comes to be seen as unbearable by bearers. This is an anxiety that has attended entrepreneurial ventures in credit driven economies down the ages, one that was relieved only by a remarkable innovation of the Industrial Age: limited liability. Available at first only to joint-stock corporations, the big idea was to limit the dues of a business to the money wilfully invested in it. Owners would get a share of profits but have nothing at stake beyond the value of their shares. This bankruptcy shield led to a boom in risk-taking for returns that gave big-budget commerce its present shape. The concept offers such a powerful incentive to venture forth that its extension to all businesses, even modest startups (say, pakoda hawkers), has graduated from “not feasible" to “why not?"
In 2008, a blow was struck in the idea’s favour when India passed its Limited Liability Partnership Act. This created an LLP format, letting people join hands to set up a business entity governed by far fewer compliance rules than a regular company, but with the personal assets of partners shielded by the law from creditors. Liability-heavy sole proprietorships can easily be converted to LLPs by involving a partner. Yet, the informal sector, where defaulting debtors can face severe consequences, has seen only scant adoption. Any campaign to promote enterprise and/or formalization ought to highlight the LLP option. Whether it can lessen suicides is hard to say, but granting the concept publicity will surely do India a good turn.
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