The Auroville economy: in dire straits

“After we presented in October 2013 our book Economics for People and Earth – The Auroville Case 1968-2008, we left Auroville with a modest hope that its economy would improve. Today, seeing what has happened to Auroville’s economy over the subsequent period 2008-2015, we realize that much of this hope was in vain,” says Manuel Thomas.

It’s February 25th. The conference hall of SAIIER is packed to listen to the presentation and conclusions of ‘the two Thomases”, chartered accountant Manuel Thomas from Chennai and Professor Henk Thomas from The Netherlands, two people who have been closely studying what has been happening to the Auroville economy over the last 47 years. “We had no intention to extend our initial study of the first 40 years,” says Henk. “But when Harini from Auroville’s Social Research Centre presented us with the data she had been collecting over the last seven years, using our methodology, we felt we should update our work.” It was a revelation, albeit a negative one. “The results of the first 40 years showed us that the Auroville economy was struggling; today it can only be said that the economy is struggling even more. In fact, Auroville’s economy is in dire straits,” says Henk.

A graph shows the dismal state. “In terms of actual rupees, the total turnover of all the income-generating units, which are the backbone of Auroville’s economy, has been rising nicely, as has their total surplus (the surplus after expenses and depreciation but before contributions to Auroville). But this is an illusion, as the rupee has lost value from year to year. A correction for inflation has to be taken into account, and then the picture becomes very different. With the year 2000/1 as base, we see only a modest rising of turnover and a decline of the total surplus and of the net surplus.

What’s the cause? “We’ve heard that it was due to the recession of the world economy. But we’ve found that this statement doesn’t hold. Since the year 2000, Auroville units have increasingly started doing business within India, and their exports have declined. Auroville’s economic development, then, has to be compared to that of India. The Indian economy has become the fastest growing economy in the world, with an average increase of 7% a year, in inflation-corrected terms, and it should have had a major stimulating effect on Auroville. But this has not happened. This means that we have to look for the causes within Auroville itself. We conclude that Auroville has not sufficiently reoriented itself and come up with solutions for reinventing its commercial approach in these dramatically changing times.” Henk and Manuel then detailed their findings.

The larger units

When we looked at the performance of the larger income-generating units, we saw a negative development which has increased from 2007-8 onwards,” says Manuel. “After 2007, there has been a reduction of the number of larger income-generating units, as well as of the total value generated by them.”

In 2007/2008, 13 units had a turnover of more than 100 lakhs. They represented 51% of the total turnover. Over the years, that number has gone down to 10 units, who are responsible for 43% of the turnover. The decline in the number of larger units is worrying.

Some large units, such as Filaure, have stopped functioning altogether. No new units have come forward to take their place. Maroma, which has played a leading role for decades, is still the dominant unit. The normal scenario is that a unit grows, plays a lead role for some time, and then others take over. But this hasn’t happened. Moreover, the units that are doing well are led by older Aurovilians. Succession planning seems to be near to non-existent. In any outside company, two well-trained successors are the norm, but where is that development in Auroville? These are not healthy developments.

What is worse is the small growth of these larger Auroville units. By any outside criteria, these units are still small enterprises. If Auroville wants to develop in the direction of a full-fledged township, it will need a minimum of three to five units of medium size which, in India, means a turnover of between 250-1,000 crore a year. Auroville is far from that.

The total surplus of the larger income-generating units has gone down. In 2007/8, 16 units had surpluses exceeding Rs. 10 lakhs; in 2014/15 only 9 units had. The total net surplus has fallen from 4% to1%. This is very worrisome, they note. “For if this is not addressed, after a couple of years, you’ll be looking at negatives.”

The very small units

There has been a substantial growth of very small units, from 52 in 2007/8 to 108 today. But they questioned if this shows a vibrant start-up culture or if it is rather indicative of a survival strategy. These units all have a turnover below 5 lakhs, which means a turnover of less than Rs 42,000/month. This means they are making a minimal contribution to Auroville.

What they see missing is the willingness of the smaller units to scale-up. The working groups that are involved with assets and business do not appear to have studied the matter and have given the required support and mentoring. This, they believe, should change. They recommend that Auroville focus on a few promising units and cluster and support them, so that their growth and contribution to Auroville can become meaningful. The others can continue in the way they like.

Auroville’s service units have also shown little development. 15 years ago they had a total revenue of 22 crores; now it is 25 crores, a marginal increase. The situation for grants and donations is similar: 15 years ago, grants and donations were totalling 21% of total monies received. There is hardly any change today.

We sound the alarm

“It’s true that the Auroville entrepreneurs are facing difficulties which are not there for an outside entrepreneur. They have been detailed in our book. But what’s distressing is that in all these years, Auroville has not found a solution to the problems. We are sounding the alarm as the survival of your income-generating units is at stake. You need to utilise your existing infrastructure (land), attract capital, attract entrepreneurs, and fight lethargy. Find solutions to overcome the specific problems due to Auroville’s legal structure. You can’t say that there is nothing you can do. You can!!”

The findings of the years 2008-1015 will be published in a postscript chapter to the book Economics for People and Earth, and will become available as an e-book or print-on-demand by July 2016.

While we are not advocating that everybody should earn the same, we propose that Auroville reconsider the monthly contribution amount. At present, each unit pays for each Aurovilian working in that unit a flat amount, while those who have their own sources of income pay for themselves the same amount (Rs 3,150 / month). We suggest that this system is changed into a progressive contribution system relative to one’s total income, where people who have more pay more, so as to create a fund where those that are better off cover those who are worse off.

We acknowledge that it will be impossible and most probably against the spirit of Auroville to control this. The success of this system will depends on the honesty and level of consciousness of each individual.

How many people are working for Auroville?

In the year 2000, a survey was conducted to assess how many people from the surrounding villages were working in Auroville and what the impact of the flow of money into the villages was. The survey showed that at the time, 4,179 people were working for Auroville. The situation today is unknown. We have to make an educated guess how many people use Auroville’s infrastructure. A new survey is urgently required.