The Lotus gives a Valentine - The Honest Truth By Ajit Dayal
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Investing in India - Honest Truth by Ajit Dayal
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PRINTER FRIENDLY | ARCHIVES
20 MARCH 2009

The BJP is emerging as the party that wants to fight for women.
Not fight with the women and beat them up - as some fringe members have been busy with in the recent past.
But actually fight for them.

Of all the election chatter that has so far made it to the news wires, the IANS article of March 18th caught my eye: "Advani’s vision: every girl a lakhpati in India."

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If voted to power, Mr Advani says that the BJP government will give Rs 100,000 to every girl in the country by the time she is 18 years old. With a view to encouraging the education of girls, the BJP would give larger amounts of money to girls as they achieved a higher educational milestone. This Ladli Laxmi Yojana has done well in Madhya Pradesh, said Mr. Advani, and the BJP will introduce this in every state.

"The principal aim of the scheme is to eliminate school dropout among girl students and to encourage them to study at least up to pre-college level. As far as girl child is concerned, her care cannot be the responsibility of her parents alone. It is equally the responsibility of the government," said Mr. Advani.

The Lotus is handing out a Valentine.
With or without the permission of the moral brigade.

Funds flow into stock markets?
Being an inquisitive finance person, I tried to model the contributions the state would have to make (Rs. 24,418), the pay outs promised by Mr. Advani (a wonderful sum of Rs. 141,400 in total), and the interest rate (11.5%) that the government contributions would have to earn to meet these pay out obligations.

For the sake of simplicity, I assumed that there were no distributors and agents involved between the manufacturer of the product (the future BJP government) and the young lady to be paid out.

If there were (as there are between you poor folks and the various funds that have been sold to you - not because those funds are good for you but because they made money for the distribution channels) the rate of return would need to be raised from 11.5% to about 13.5%.

Table 1: With love from me to you: the BJP sends a Valentine
11.50% Year 1 Year 2 Year 3 Year 4 Year 5 Total School Payouts
Required return Contribution Contribution Contribution Contribution Contribution Value standard over time
  INR INR INR INR INR INR   INR
Year 1 6,000              
Year 2 6,690 6,000            
Year 3 7,459 6,690 6,000          
Year 4 8,317 7,459 6,690 6,000        
Year 5 9,274 8,317 7,459 6,690 6,000      
Year 6 10,340 9,274 8,317 7,459 6,690   kg  
Year 7 11,529 10,340 9,274 8,317 7,459   1  
Year 8 12,855 11,529 10,340 9,274 8,317   2  
Year 9 14,333 12,855 11,529 10,340 9,274   3  
Year 10 15,982 14,333 12,855 11,529 10,340   4  
Year 11 17,820 15,982 14,333 12,855 11,529   5  
Year 12 19,869 17,820 15,982 14,333 10,625   6 2,000
Year 13 22,154 19,869 17,820 15,982 11,847   7  
Year 14 24,702 22,154 19,869 17,820 13,209   8  
Year 15 27,542 24,702 22,154 19,869 10,268   9 4,000
Year 16 30,710 27,542 24,702 22,154 3,087   10 7,500
Year 17 34,241 30,710 27,542 13,663 3,442   11 9,900
Year 18 38,179 34,241 30,710 15,234 3,838 122,202 12 118,000
              Total 141,400

There are an estimated 172 million female children from new born to 14 years of age. Let’s assume that there are 50 million female children from new born to 5 years of age who will qualify for the Ladli Laxmi Yojana once the BJP government takes over.

So how much will it cost if all the 50 million young girls go through with the Yojana? A sum of Rs. 1,221 billion; Rs. 122,100 crore; USD 23 billion - a little more than 2% of India’s GDP. A small price to pay.

And there is no sensible instrument out there that can generate this 11.5% return to meet the pay out obligations. Yes, there are the real estate companies willing to issue useless pieces of paper to eager mutual funds only to end up in defaults; but - I did say "sensible".

So all this money will be invested in the stock markets. The FIIs have sold USD 19 billion worth of stock over the past 15 months. These little Ladli will make the BJP buy USD 23 billion worth of stock? Who needs the hedge fund gamblers anymore? We have the BJP’s Valentine gift. Welcome to the new Bull Run!

The politicians talk business
"There is a need to launch a sustained nationwide campaign, combining both government and non-government efforts, against evil practices like female foeticide. If the BJP and NDA are given the mandate in the next parliamentary elections, I shall personally lead the 'Beti Bachao' campaign as the head of the government," said Advani.

But that was for the voters and the mothers of the Ladli’s.
But nothing is what it seems.
The real message from the BJP is this: start buying stocks because as soon as we get to power, the power of Valentine’s love will be in full bloom.

Our vote bank is the stock brokers and the distributors. And they have no business volume these days. The Ladle Laxmi Yojana is one way to generate business.

The future father-in-laws to be will be happy that we have created a well-defined dowry mechanism in the Yojana.

The shopkeepers are also our vote bank. They know that these young girls will start smoking, drinking, and shopping - once they are rich. So they will also be happy.

And those young boys who beat up women, Muslims, Christians, Hindus - anyone they feel like - at random, they will have something to do.

And they will stop this party infighting - mentally torturing old men like me - and maintain some party discipline!

Jai Ho!

Oops, isn’t that a Congress song?
Well, we will send them the application forms for the Ladli Laxmi Yojana for free. No distribution fees on their applications.

Note: The Honest Truth is authored by Ajit Dayal. Ajit is a Director at Quantum Advisors Pvt Ltd and Quantum Asset Management Company Pvt Ltd.. Views expressed in this article are entirely those of the author and may not be regarded as views of the Quantum Mutual Fund or Quantum Asset Management Company Private Limited.


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