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Tuesday, October 26, 2010

Donating India Abroad


In 1975 a young man having tasted salt in the workshops of one of the biggest steel manufacturers of the world ,attended the advanced management programme at Harvard School Of Business,the mecca of management education .His stint at Harvard was to be soon followed by 26 years of painstaking work ,failed adventures and drowning companies until he tasted success after becoming chairman of one of the largest business conglomerates.The man was Ratan Tata,one of Indias most futuristic and prominent businessmen

In a spirit of philintrophy the TATA Trusts have decided to donate $50 million to Harvard School Of Business.A bit earlier another Indian Business Tycoon,Anand Mahindra had donated $10 mn to Harvard Humanities Department.The donations have been celebrated in the Indian media and sadly nobody seems to raise the obvious questions.Instead these multi million dollar donations are seem to announce the arrival of India in the big club.There was a time when India struggled to open premier institutes.Its best institutes like IIT's and IIM's were started with foreign donations and collaborations.50 years hence....the story seems to have reverted or is it?
The bigger question which seems to have missed everybody attention here is:Should a business house donate such extravagant sums abroad when more than 50% people in India do not even have access to primary education (Source:UNESCO).The 2010 budget estimated total expenditure on education sector at 4.1% of GDP.Yet we are ranked at lowly 82 in a pool of 150 counteries.India has just 2 universities in the world top 100 and just 3 in world top 500.The Government aims to spend more than Rs 1000 crore on development of new IIT's and IIM's to bridge the gap between quality technical education and industry requirements.So while India grapples for funds our biggest chose to donate abroad.

Before arguing on,let me first analyze the purpose of business in a free market society.Business in any society exists to create value,so that the added value flows back in form of profit and this profit can again be used for development of society.Seen in this light a bigger question that arises is :Should groups like TATA's and Mahindras be allowed to donate such big amounts when more than 80% of their profits come directly or indirectly from India.In essence,shouldnt this money be ploughed back in Indian economy?Further would these kinds of donations make entry of these business houses easier in the larger economies?Arent we acting like the proverbial slave who toils hard to work for the master for free.Here the masters are people in western countries and slaves ,Indians who toil hard to generate wealth only for their capitalist masters donating abroad for unknown reasons.

Perhaps,TATA's and Mahindra's feel with acquisition of companies like Tetley,Corus and Jaguar and land rover,it becomes their duty to act charitably for western economies.Perhaps then it means that these acquisitions are creating sustainable profit for their business groups or if not they are atleast paying back the high interest loans that were taken to fund these acquisiotns.,The answer ofcourse is an open secret.Any multimillion dollar donation would be justified had it been funded through profits in western counteries.Sadly this is not the case

From a finacial point of view,a 50 million dollar donation in a developing country has better utlization and reach than in a developing country.What do you think is better? Using 50 million dollars to educate a million poor people or using the same money to make 5 start buildings for educating CEO's of the world (the $50 mn donation at HSB would be used to make a new complex for executive MBA programmes).Isnt management education at top level supposed to be funded by corporates.An average executive programme at Ivey League Colleges costs close to 100,000 US dollars and would be attended by CEO's or top management who would soon go on creating new busts like Lehman and 2008 financial crisis.If purpose of any donation is to benefit the needy then it seems TATA group made its worst investment ever.

After deliberating all this it seems the only reasons such donations are being made is to make the name of the families immortal.Quickly after accepting the donation HSB announced it would be naming a new building at campus as TATA HALL and name of Humanities department be would be changed to incorporate Mahindra.Another luxury spending of the super rich ..is it?In yester year Kings were known to make grand masoulems and pyramids to make themselves immortal.Perhaps today the culture has changed..donate a few million to get yourself a page in history.Who would have remembered Alferd Sloan but for MIT Sloan or would have remembered Harvard but for Harvard University.If this is indeed the case,then I have no argument with Mr. TATA.Everybody has a right to spend his hard earned money.But then the tax slueths in Delhi ..do collect your Luxury Tax recievable from Bombay House


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