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September 11, 2006

First published September 10, 2006

 in Times of India

Karmic Debt and Karmic Equity

By Dr. Devdutt Pattanaik and Rajan Krishnan (Times of India, Mumbai, Consumer Edge, 9 Sept 2006.)

Where does the small Indian investor put money: in lower-risk debt instruments or higher-risk equity instruments? Twenty years ago, the preference for the salaried class was the former. Fixed Deposits, Provident Fund, Public Provident Fund, Insurance Policies and Postal Certificates. Different avatars of debt instruments that lend money and earn interests. Returns were low but generally secure, thanks to the Government’s safety net. Then came UTI promising dividends of over 20% each year. Many invested here, assuming that such returns were guaranteed forever. Most did not realize this was an ‘equity instrument’ that made the investor an indirect stakeholder in the market (unlike shares where one is a direct stakeholder), sharing market fortunes and misfortunes. Then came the spectacular fall — a combination of mismanagement and market reality. The salaried class felt cheated. They recoiled in horror from all equity instruments despite promises of great gain and shrunk back into a risk free hole, content with debt instruments with returns barely covering the rising inflation. Now, they are back. Mutual funds are every where. From Business Houses to Banks, Reliance to Tata to Franklin Templeton to HSBC and HDFC. They are Monthly Income Schemes and Systematic Investment Plans. You can see them on hoardings, in television, in mailers. They call you, enchant you, enthrall you. The zeal is missionary. They are out there to convert you as they share their ‘Rich Dad, Poor Dad’ wisdom of ‘letting your money make money’ and ‘pay yourself first’. Because the consumer is changing. They are spending more. Buying capital goods and luxury holidays on installments. There is clearly room for more investment. But analysts observe, investments continue to be in low risk debt instruments. The shift to high risk equity instruments is rather sluggish. That is why the Business Houses like Reliance and Banks like HDFC offer not only Mutual Funds but also Insurance Policies. Indians have traditionally been risk averse. It has perhaps something to do with the monsoons. Fear of droughts and floods is so ingrained in us that we prefer being moneylenders to farmers. Interests are more secure than harvests. This preference of debt-instruments over equity-instruments is similar to the preference in ancient times for dakshina over daan. Daskhina is a fee paid to a Brahmana for his services. Daan is an act of charity given spontaneously to the Brahmin. One can be encouraged to do daan but one is obliged to pay dakshina. Both are ways of making wealth flow (only towards the Brahmin, of course). Daskhina is a karmic debt-instrument. By giving a Brahman dakshina, one repaid one’s debt to the priest incurred when he invoked God through various rituals on one’s behalf. This is why, especially in South India, when the lamp waved before the image of the deity is brought to the devotee as a physical manifestation of divine blessing, the devotees first place a coin on the aarti plate and only then receives God’s warm grace. Daan, by contrast, is a karmic equity-instrument. You don’t have to do daan. It is a purely voluntary. But by doing so, you earn good karma or punya that goes a long way in wiping out the bad karma or paap earned in the past. Other karmic equity generating instruments are going on a pilgrimage or visiting a temple or taking a bath in a holy river or fasting. The story of Harishchandra brings out the difference between daan and dakshina very clearly. Harishchandra disturbs the sage Vishwamitra’s meditation. Enraged, the sage, who was on the verge of acquiring magical powers, threatens to curse the king. To prevent this, the king offers the sage all his wealth. The sage accepts. Harishchandra leaves his kingdom to the sage and walks out with his family and the clothes on their body. Then Vishwamitra stops him. “What you have given me is not daan,” he clarifies. “It is a ritual act to cover for the damage caused when you interrupted my meditation. By accepting your kingdom, I have protected you. You are in my debt. Now where is my dakshina.” A helpless Harishchandra has no choice but to sell his wife and son as slaves to generate money for paying Vishwamitra’s fee. When Krishna gives a portion of his wealth to Sudama, it is an act of daan. An expression of spontaneous and unfettered generosity. Sudama, an impoverished Brahmin, comes to Krishna seeking some financial assistance but is too overwhelmed by Krishna’s affection to ask for anything. Krishna eats the puffed rice brought by Sudama with relish. But Krishna’s wives stop their husband from eating everything. “Leave something for us,” they say knowing that Krishna planned to give an equal proportion of his wealth to his poor friend. While the scriptures extol the virtues of daan, the Puranas recount many tales of people who have got into trouble because of their fondness of daan. There is Bali, king of the Asuras, who in an act of charity offers the short Vaman the three paces of land. Vaman turns into a giant and in two steps claims lordship over all of Bali’s dominions and shoves him under the ground with his third step. Karna of Mahabharata loses his protective amour because he offers ‘all that you desire’ to anyone who approaches him. Investing in dakshina is necessary to repay all debts and liberate oneself from the cycle of rebirths. Investment in daan not only washes away past debts but also offers the promise of future fortune. But there are no guarantees. Hence caution is advised. He who ventured into the realm of daan was admired as ‘daan-veer’ or the hero of charity (there is no such thing as a ‘dakshina veer’). For to invest in personal or social equity is indeed heroic. You need to have the skills and the heart of a veer. The winds of fortune may not always blow your way. And you may fall spectacularly like Enron. But should you win (as the investors in Infosys have realized) the glory will all be yours.

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