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The Voice of wealth creation - January 1, 1998 - Views on News from Equitymaster
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  • Jan 1, 1998

    The Voice of wealth creation - January 1, 1998

    The greatness of this country lies in the fact that there are many people who have dedicated their lives to helping the less fortunate and those in need. People who, despite the odds being stacked against them in a society increasingly dominated by greed and money, are able to make a difference.

    The true wealth creators are not those who give me shareholder value with financial jugglery but, rather, those who make this country a better place to live. A few days ago I had the honour of meeting a group of people who have devoted their lives to giving street children in Mumbai a second chance in life. Voice, Voluntary Organisation in Community Enterprise, has 400 street children between the ages of five and 15 under its fold - youths without families who live on the streets and yet still find water every morning from some tanker or fire hydrant to have a bath and go to the school clean. In the classroom they are taught values of love and friendship, how to read and write, and skills like screen-printing and sewing to earn a living. And they are even taught how to save money in a bank. All this allows them to leave the nightmares of the street behind.

    The cost of maintaining these 400 children is Rs.70,000 each month. Mumbai has over 200,000 helpless street children who live in railway stations, at traffic lights, or under flyovers. To give them all a chance in life would cost Rs.420 million every year. Though only 0.0037 per cent of GDR it is unlikely that the government will do much about it. The experience of the past 50 years has shown that our government is good at creating poverty, not abolishing it. Many of the best hospitals and colleges in the country are set up by private people, not these in the government. Throwing microphones at each other and attending international conferences is probably more important for our representatives in government than worring about the happiness of people. But maybe corporate India could help - without creating a dent in its objectives to build financial value.

    In financial year 1997, the 200 corporates in the Quantum Stock Market Yearbook paid an estimated Rs.75,000 million in income taxes - 178 times the money needed to educate and give all 200,000 street children in Mumbai a better life. Under Section 80G of the Income Tax Act, 50 per cent of the money given to qualified charitable organisations is deductible from taxable profits. Maybe the law should be changed to make donations to charity 100 per cent deductible. The way money will flow directly from the companies to charities of their choice without the fear that tax money is being thrown into some bottomless pit for feeding nonexistent animals or building invisible irrigation canals.

    Will this damage shareholder value and market caps? Hardly. Even if corporate India were to give the Rs420 million required each year to help the 200,000 needy children of Mumbai that would amount to only 0.0012 per cent of pre-tax profits. In fact, if the efficiency of money management by corporate India were improved by four hours, Indian corporates would save enough money from lower interest costs to pay for the annual expenses of all street children for one entire year! This makes you realise how easy it is to wipe out poverty.

    Creating shareholder value is great for newspaper headlines but, at the end of the day, after leaving the financials behind in the office most of us suffer the guilt of seeing children begging on the streets. At Voice, I saw how little the children there had and yet how happy they were. The joy of a child as he tool out a Re1 coin and put it in a savings box while the other children watched is a feeling that neither you nor I will ever experience. The pride they take in their songs, their school, and their clean clothes is something we probably lost in early childhood and certainly in our business, where money is the end all and be all. Twenty children singing hymns with fervent hope is a humbling experience and a rude reminder of the hollowness of money.

    There are many organisations like Voice, each with a power of its own to use simple actions that bring immeasurable joy to those they love and protect. These are the true wealth creators of India, for they give human life the lover and dignity it deserves. May the people behind Voice and the other organisations get the support they deserve and may each of us take a moment to see how we can assist such organisations in creating a country of educated and skilled citizens - a pool of wealth that is more crucial for sustained economic development than the market caps and enterprise values we are so obsessed with.



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