Two elections - and a funeral - The Honest Truth By Ajit Dayal
Investing in India - Honest Truth by Ajit Dayal
Two elections - and a funeral A  A  A
17 NOVEMBER 2012

Well, the US elections are over and the one in China - if you can call it an 'election' - has wound down.

After 18 months of campaigning and an estimated spend of USD 1 billion by each candidate (and an estimated USD 6 billion spent on the entire election process by all candidates), President Obama was re-elected by a wider margin than anticipated - but he actually lost 10% of the votes he had secured in 2008.

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Table 1: Obama wins - but with a lower margin than 4 years ago.
  McCain (2008) Obama (2008) Totals (2008) Totals (2012) Obama (2012) Romney (2012)
Popular votes won 59,934,814 69,456,897 129,391,711 120,862,904 62,085,892 58,777,012
% of votes 45.70% 52.90% 98.60% 98.50% 50.60% 47.90%
electoral seats won 173 365 538 538 332 206
% of electoral seats 32% 68% 100% 100% 62% 38%
Source: Wikipedia, Huffington Post

Table 2: Who can vote for the President?
Who can vote How many votes?
Senators (2 for every state) 100 (since 1776)
House of Representatives (proportion to population) 435 (since 1776)
Quota for Washington, D.C. 3 (since 1964)
Total eligible electoral college votes 538
Source: Wikipedia, Romney campaign

The results - in terms of seats won - in the Senate or the House of Representatives has not changed much. The US government is still spending more than it earns and borrowing money to fund that stubborn gap. That borrowing is being met by the unique ability of the US to still print dollar bills and issue US-debt to other countries (like China and Japan) that seem to have an unlimited appetite to buy US government obligations. If the US did not have the ability to print its way out of trouble, the rating agencies would have rated the US close to junk status by now. Or - to put it another way - if the countries buying US debt did not have the full faith that the US would somehow fix its problems, the US government's ratings would be close to junk status.

President Obama has won the election on the basis of not cutting spending, but raising taxes. With the Republicans still controlling the Senate, passing such a "socialist" bill will be a problem. Gold still looks like a good place to park some of your savings.

The other "election" was in China where, after a week-long session of the 18th Party Congress of the Communist Party, it was decided (as expected) that President Hu Jintao will be succeeded by Vice President Xi Jinping and Premier Wen Jiabao will be succeeded by Vice Premier Li Keqiang.

For all the openness of the US elections that occurs every four years and all the behind-the-scenes of the elections in China that occurs every ten years, the outcomes seem to be a function of who you are, rather than what you stand for.

Despite all the noise and din, the Presidential elections in the US were along lines that would have made an inward-looking isolationist proud. Obama won some 90% of the black vote, 65% of the Latino vote, and 55% of the female vote. Romney apparently won 55% of the male vote - and if you were white and male and above 65 years you probably voted big-time for Romney, too. But old, white men are dying. Those that wish to live off the state are increasing. Numerically, there are more blacks, Latinos, and Asians in the USA in 2012 than there were in 2008. And, if my derived calculations are correct, the US voting population has declined by 9 million people. I guess America is greying, dying, and turning anything but a white male.

To win in China you needed to be part of the inner circle where years of grooming and - if recent trends in news stories are to be believed - an ability to share in the loot without drawing any attention to the loot being taken. Something that is still an art in India, despite the recent intrusions into private transactions between private entities and into general family matters by the powerful RTI.

A funeral for integrity?

Not only is it time to write an elegy for the dwindling number of white man who speak with a forked tongue, but it may be time to allow people with forked tongues to flourish. If the revered and eminent Deepak Parekh is to be believed it is time to give up any effort of making the Indian tongue speak straight.

At an event reportedly organised by CNBC-TV18 over a weekend (source: Business Standard, November 4) the highly respected Mr. Parekh reportedly said, "Corruption is not going away from our country" and went on to bombard Arvind Kejriwal that the "manner in which he is going about it is not right".

I sway no banner and hold no disgruntled placard for the "manner" in which Mr. Kejriwal of the India Against Corruption (IAC) is doing his work. Besides reading the twisted articles that masquerade as news these days (that is, when you can find the news in between the reams of advertisements) and hearing the shouting matches that are supposed to be sensible debates, neither have I met Mr. Kejriwal nor have I met anyone from the IAC.

But I like the topic of Mr. Kejriwal's fight: root out corruption and root out the corrupt whether the bribe giver or the bribe taker. If I had to choose one thing that needs to be wiped out to ensure India has a better future, the fight against corruption would be my entire focus.

But Mr. Parkeh's "slamming" of the media, as reported by Business Standard, for focusing too much on corruption and Kejriwal is shocking. "I would like to blame you, the media. You have nothing else to report other than Kejriwal. Why do you give so much of importance to all this? Give us some news, don't tell us what Kejriwal said," Parekh said.

Of course, it is possible that Mr. Parekh chose his words as the audience was largely the crowd that tends to benefit from such issue of corruption, "a gathering of top industrialists and bankers". I would assume that most people in the room had bloated market caps and net worths - padded by favours from the government. To be invited for their dinner bashes you cannot bash them.

Or, it could be that Mr. Parekh truly believes that corruption is indeed a way of life and need not be troubled. And, if not a battle willing to be fought, then better to be part of the system. Mr. Parekh helped select the brilliant people who built HDFC - an entity untainted by corruption and one which I hold in high esteem. For that he must be given a lot of credit. Maybe he is now tired of fighting the system and has surrendered to now being a part of the opaqueness that breeds hidden reasons for doing business. Maybe that is why HDFC Mutual Fund has made a clear decision to be part of the distributor-led system.

I helped set up Quantum Mutual Fund and we compete with Mr. Parekh's HDFC Mutual Fund. It was my interaction with the distributors in January 2006 that led us on the path of fighting the close-knit relationship between the mutual funds and the distributors. The focus of both the partners in the relationship was to maximise the money collected. What happened to the investor was irrelevant. Whether a product was sold or mis-sold was not material. Size mattered, flows mattered. Size gives fees to the AMC - and flows give commissions to the distributors. The partnership is complete.

A bribe is money paid (or gifts given) to influence an outcome that would not normally have been the outcome. The mutual fund industry was bribing the distribution channels to sell products that may not have been good for investors. The distribution channels were bribing the mutual fund industry by guaranteeing flows from their clients provided they agreed to bow down to their methods.

It was a symbiotic relationship: two parasites feeding of each other. Just like that of the politicians and their industrialist or businessmen friends,

Yes, Mr. Parekh has a point: Corruption cannot be eradicated.

But, Mr. Parekh is wrong in saying that it should not be in the news every day.

Or even the "only news".

None of us can rid India of all its evils; none of us can completely eradicate corruption.

But each of us, one step at a time, can decide to break the cancer of corruption and stop it from spreading and engulfing our daily lives and confiscating the future of our children.

That is our duty; that must be our goal.

All else can wait. I hope you are with me.

Option 1: Give up! Mr. Dayal, you are an idealist and will fail. I will not waste my time fighting a battle I know that I will lose. My vote is for Mr Parekh and I recognise that by not doing my own small bit to fight corruption, I am ensuring that India will not be a place for my children to grow up and live in.

Option 2: Fight corruption! Mr. Dayal, you are an idealist and will fail. But I agree with you and I will do my little bit to help India win this mother of all battles against corruption. While Mr. Parekh is correct in saying that corruption cannot be completely eradicated, it is our duty to fight it as much as we can. Then, and only then, can our children have a hope in this country.

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Disclaimer: The Honest Truth is authored by Ajit Dayal. Ajit is a Director at Quantum Advisors Pvt. Ltd and Quantum Asset Management Company Pvt. Ltd. The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and has not been authenticated by any statutory authority. The author, Equitymaster, Quantum AMC and Quantum Advisors do not claim it to be accurate nor accept any responsibility for the same. Please read the detailed Terms of Use of the web site. To write to Ajit, please click here.

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23 Responses to "Two elections - and a funeral"

neeraj varshney

Dec 15, 2012

Dear Mr Dayal,

I guess it takes a lot of courage to fight corruption. Mr Parekh, though leads an honest Corporation like HDFC, yet his advocating a sort of media ban on Kejriwal is a tacit acceptance of corruption being in our DNA. Very few business houses remain untouched by this Devil.

I for one have done my two penny worth on this. I have redeemed all my Mutual Fund holdings (which included HDFC Schemes too) and have put all that money into Quantum Schemes. Secondly, I have motivated a lot of friends and acquaintances to invest in Quantum Schemes. Not that I have any love lost, but I wish to make money, the ethical way. And Quantum is a step in that direction.

An ex-CBI director becomes a whistle blower now, telling us what everybody knew much earlier that Telgi was only the small fry in the Stamp Paper Scam. What country are we living in? Sometimes I too dread the future of my kids.I wish you all the best and please do not be skeptical. But a churning will happen, gradually. Our judicial system has to put behind bars a lot of these corrupt politicians, industrialists, media owners and bureaucrats. That will be the start point.


Nita Basu

Dec 3, 2012

Agree, Mr.Dayal. My reaction to Mr. Parekh's comments were similar.



Nov 29, 2012

Ajit, totally agree with your views. It is shame on Parekh to give such statement.



Nov 24, 2012

Fighting corruption is the only option !-All those who got even preliminary education must opt for option -2(your article of 17th NOV -2012 ) for the future of this great nation and for the sake of their OWN CHILDREN .Long live democracy, long live BHARAT.May GOD bless the land of saint and great leaders like MAHATMA GANDHI and SARDAR PATEL

Like (1)

Arun Palkar

Nov 22, 2012

Dear Ajit,
I agree with you completely. Ours has become a country of 'banias' meaning that we as a people and country are prepared to do any "deal' which ensures status quo. There is nothing like 'national pride' left in the behaviour of either our politicians -whether ruling or opposition, nor our leaders in industry. The manifestation of that is reflected in the ind of statements that come from a person like mr.Deepak Parekh, who is held in high esteem. The need of the hour therefore for India to elaect a leader of the stature and statesmanship of Sir. Winston Churchil, who would at least be prepared to shed some personal blood and inspire others to do the same for the sake of getting this great nation on track.

Like (1)


Nov 22, 2012

we have to adopt option no 2. rest of the things as narrated by you in article has been same for centuries, may remain does not mean we need to bow down. god also continuously changes everything, let us try to do same in our way.

Like (1)


Nov 20, 2012

Guess Mr. Parekh is drinking the same kool-aid as our politicians and other government "servants."

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Nov 20, 2012

Leading industrialists, professionals and the glitterati of our Country have learnt to live with corruption, passively encouraging it by being blissfully ignorant or disinterested about it. The biggest example of this is our PM himself, who though known for his unimpeachable personal integrity has presided over one of the most scam-tainted government ever in our country's history. Even renowned industrialists, professionals and institutional leaders have adopted similar attitude as status quo favours them and hence they favour status quo. Anything revolutionary, like what Kejriwal is trying - maybe in a hotchpotch manner - will topple the comfort zone of our status-quoist industry and market leaders and perhaps unseat them from their leadership positions.

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t.rama bhat

Nov 20, 2012

I fully disagree with Mr.Parekh's opinion on anti-corruption crusade of Mr.Kejriwal, and it's highlight by the media.
Mr.Kejriwal's detractors may belittle his efforts by saying that they are being made to help his political agenda. So what???? As long as corruption in high places is exposed, it is OK for a layman like me (whatever be the motives of the highlighter).

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Rajesh Doshi

Nov 19, 2012

Option 2: Any one who feels India is his country cannot avoid this responsibility. But just check out a large number of our Government supported Professionals - Doctors, Engineers from IITs, MBAs from IIMs, who have run away from their country of birth. The numbers of children of senior Government officials who have settled abroad is very large. They all understood Mr. Parekh's logic.

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