CONFLICTING INTERESTS OF PRODUCERS AND CONSUMERS

30/09/2010

      The Government of India has extended the ban on exports of cotton, as the consumer industry,  namely textile industry has complained about increase in the prices of its raw materials which would make its exports uncompetitive. Often, the government bans the exports of onions to bring down the prices domestically to benefit the consumers.  It also allows imports of  products/commodities when their prices in India go up. This means that:

    The Government wants cotton growers to subsidise exports; it wants onion growers to suffer losses or forgo profits for the benefit of the consumers. When the prices of cotton goes down, does the textile industry comes forward to pay higher prices? When the price of onion goes down, do the consumers volunteer to pay higher prices? Of course, the government sometimes procures certain products at  particular prices. The prices should be allowed to be determined by the market forces. In the process,  for examples, if the textile exports suffer , the government should extend cash or other assitance to the exporters, considering the need for foreign exchange. In the case of domestic sales, the industry should pass on the increase in prices to the consumers.

    However, a question arises as to the incentives that the government extends to, for example cotton growers by way of restricting/ banning imports to ensure  remunerative prices for the growers. Restricting the imports is not just to help the growers, but also to conserve the foreign exchange for use by the industry.  However, the ultimate solution should be to allow freely, both imports and exports of raw materials and finished products except where the non-renewable raw materials  like ores, need to be conserved for future use.


Foreign Tours of Prime Minister of India

13/09/2010

India is a large country. Every 6 th person in the world is an Indian. Every 5 th child is in India. There are a lot of complex issues inside the country which await urgent solution. The Prime Minister (PM) of India handles 5 Ministries (space, atomic energy, planning, culture & Personnel).There about 40 Ministries in the Government. There are 35 States and Union Territories (states, UTs).

• It would be useful if PM could review the working of the central Ministries periodically (once in 3/6 months). While it may take about one full working day to review the working of a small Ministry, it may take about 2 days for review of each of the major ministries like Finance, Home, Agriculture, Defence and External Affairs.

• It is necessary for the PM to review the progress in the states, UTs with the Chief Ministers (CM)/Administrators regularly and also brief them about the activities of the central government. Discussions with each CM may take 1-2 days depending on the size and problems of the state.

• It may be necessary for PM to address the public not only to tell them about the government activities but also talk to them on the duties and obligations of the people, ethics, morality, need for hard work, etc.

 • PM has also to address various Manufacturers’ Associations, Chambers of Commerce & Industry, Think Tanks, NGOs, Farmers’ associations etc not only in New Delhi but through out India

• PM may also have to find time to inspect major projects in the country.

 • Besides the above, PM has to devote time for the Parliament affairs

• discuss matters with visiting foreign VIPs,VVIPs etc.

• In the midst of all the above, PM has also to devote time for the party and political affairs.

While PMs of other countries have frequent foreign tours, PM of India undertakes very few foreign tours. Even then, in view of the heavy workload within this large country, it may be better, if the concerned Ministries of the government schedule  as lesser number of foreign tours for the Prime Minister as possible. It may also be desirable if PM gives up the Ministry’s he is handling directly and concentrate on co-ordination, reviews, monitoring etc of all the ministries


Taxes and Welfare Measures

02/09/2010

Some of the governments in the world not only exempt people with income up to certain limit from payment of income tax, but also extend to them several concessions and welfare measures like subsidized or even free rations, clothing, shelter, transport, medical facilities, education etc. This does not seem to be the correct path for the long term benefits of the beneficiaries or the development of the economy. Some of the considerations for this conclusion are:

(i) Every one should pay part of his income as tax to enable the government to work.The low income people can be asked to pay a smaller percentage of income –may be 5% or even 2% or 1%, instead of totally exempting them from payment. After all they are the beneficiaries of governments’welfare measures.

(ii) The people by paying the taxes will feel and be more responsible citizens

(iii) Obligation to pay income tax will induce people to work harder and longer to earn more to compensate for the tax expenses. This will lead to increase in production of goods and services

(iv) Restricting welfare measures only to those earning up to a certain level will make people not to strive to earn more for fear of foregoing the benefits. This will make people remain in poverty perpetually.

(v) The governments should look after not only the poor people but also those with good income and therefore, welfare measures should be for the entire community and not for those with low income only

(vi) Substantial number of people are poor mainly because of their or their fore fathers’ bad habits, like consumption of liquor, smoking, spending much on cosmetics, indulgence in luxuries, consumption of high cost items etc. Exempting such people from payment of taxes will mean not dissuading them to give up bad habits

(vii) Similarly it is not correct to conclude that rich people have become rich by exploiting others or at others’ expenses. Many people are rich because of their frugal habits, savings, simple life, low consumption, avoiding luxuries etc. They should not be discriminated against, by denying them governments’ welfare measures. 

Governments’ efforts should be to provide necessary skills and facilitate employment to all the people and thereby make them earn for their needs. In developing countries, it is very easy to create jobs, as there are innumerable works to be undertaken.