reducing/eliminating unemployment

Indian political parties seem to think that government can do everything including creation of of jobs on its own. But this is not possible. Government should involve the rich people who can invest their money in establishing factories, business establishments, service establishments etc which can provide jobs to the people, produce goods and services and thus increase the GDP of the country.If the country is to develop, there is need for capital which rich people can provide, there is need for workers who can work, there is need for services like transport, electricity, trade etc.which service establishments can provide. Therefore it is necessary to have harmonious relationship between different contributors and effective coordination. The government’s contribution in economic development should be indirect in the form of facilitation, concessions, infrastructure development. Government’s priority should be improvement in law and order situation, provision of social security and similar things.

Neither money nor manpower should remain idle.

A country develops when its capital and manpower are  fully utilised. In the past there was shortage of capital and it was utilized fully. However, black money was remaining mostly idle. Manpower was not fully used as there were not many avenues for employment. The best thing to have been done is allow black money holders to bring out the black money with some assurances and some concessions and encouragement. If this had been done there would have been no need to resort to demonetization.

Now what is to be done is to ensure that black money is not created by reducing corporate tax. Income tax rates are already low, compared to rates in many of the developed countries.

Capital,wages,prices,taxes

If the owner/company does not invest capital, workers do not get employment and earn wages. If the workers do not work, owner/company does  not get profit. There are people who think that excess(more than reasonable) profit should be distributed among the workers. Some others think that excess profit is due to the company charging higher than the reasonable price and that prices should be reduced so that the profits of the company are reasonable and the consumers are not exploited. There is yet another view that the government should increase the tax rates or new taxes should be imposed. All the views seem to be correct.The point to be considered and decided is which action will expedite development of the country as a whole. Going by the experience, government getting more taxes is not going to help the country much as benefits of its schemes do not reach the people in full and often result in wasteful and unproductive work. As the number of consumers is too large, the price reduction can only be negligible and the consumers will not feel the benefit.As regards increase in wages/payment of bonus to workers, this will increase demand for products which may lead to higher  production and higher GDP. However, if the workers are already getting reasonable salaries, they should not get additional amount.The only option left is to allow the company to retain the excess profits, so that it can expand its existing factory or set up new factories. However, it should be made clear that new taxes are not imposed only if the profits are used for expansion of the existing factory or setting  up of a new factory, thereby generating employment, increasing production and thus  contributing to the expansion of  GDP of the country..

 

India to be a developed country

If India is to be a developed country in the world,

i.every able bodied person should be assured of employment;

ii.everyone should have enough to eat; not only cereals, but also vegetables, fruits, meat, milk, eggs, as also tea, coffee and other beverages and there should be no beggars;

iii.everyone should have sufficient clothing, spacious and comfortable houses with all the required furniture and furnishing, adequate and suitable means of transport and also all the gadgets which make life easy;

iv.literacy rate should be 100%;

v.people should enjoy leisure;

vi.people should not quarrel over petty things;

vii.arts and literature should flourish;

viii.there should be no distinction between one person and another person

ix. everyoe should likes the other

x.people should not quarrel over petty things;

xi.crime rate should be very low;

xii.its citizens should be proud of their country

xiii.there should be no secessionist demands;

xiv. there should be no communal and caste conflicts;

xv.there should be adequate social security measures;

xvi.its citizens are respected all over the world;

xvii.Indian companies should export technology as well as capital to other countries in large measure;

xviii.its volume of trade should be very high and consequenly it is in a position to influence the world trade policies;

xix.its citizens are knownfor inventions and are among the largest scientific and technological awar winners;

xx.its currency should be strong and freely convertible and should be the most sought after currency

xxi.it should be among those that decide the course of events in the world

India-Economic Development of the States

Among the major states Haryana has the highest net state domestic product(NSDP) of Rs.78000 during 2009-10 followed by Maharashtra with Rs.65000,Punjab Rs.61000 and Gujarat Rs.50000.

The southern states of India have more or less the same level of net state domestic product with Kerala having Rs.49000,Karanataka Rs.45000, Andhra Rs.44000 and Tamilnadu Rs.45000(for 2008-09).

The large states like Bihar Rs.15000,MP Rs.24000,Rajasthan Rs.29000 and UP Rs.21000 have very low NSDP.These states have high density of population but this should not be a reason for low per capita NSDP.States like Haryana,Punjab,Kerala and West Bengal also have high density of population but their NSDP is much higher than these states.The cause of under development is due to the states not fully utilizing their manpower assets.The resources of these states,as far as capital is concerned,is not scarce as entrepreneurs from all over the country would have located their factories if the work culture of the people is good.The states also are good locations for factories being densely populated ie the market is large.In states like Tamilnadu and Karnataka the entrepreneurs are from states like Rajasthan,Gujarat and foreign countries..In order to attract industries,the states have to create ideal conditions.

It is also observed that smaller states like Haryana and Punjab and medium states like Gujarat,Tamilnadu,Karnataka,Andhra Pradesh and Kerala have higher NSDP.In this context,it is important to divide the states like UP,Bihar,MP and West Bengal.

Money, Printing of Currency Notes, Inflation (contd)

Excerpt from the manuscript “What Ails Indian Economy?”

Coinage is said to have been invented by the Chinese only around 700 BC. Paper currency is believed to have been invented, again, by the Chinese only around the 11thcentury AD. For trade between countries, even as late as 16th century AD, barter system was used.

At present Indian currency notes are issued by the Reserve Bank of India (RBI)/Ministry of Finance (central government). If more money is required more currency notes could be issued by the RBI and the government could borrow from them. Under the heading INTERNAL DEBT, it was seen that the per capita debt of the government is only Rs.8000 in India, while it is Rs.860, 000 in USA and Rs.1500 000 in Japan. To start with, Government could borrow an additional amount of Rs.100, 000 per head. The total per capita debt would go up to only Rs.108,000 which is just about 12% of per capita debt in USA and about 7% of per capita debt in Japan. By the additional borrowing, the government can mobilize capital of Rs. 1,00,00,000 crores. At an average wage rate of Rs.70 per head in rural areas,( the wage rate per day for a male worker is Rs.50- 70 and for female worker, it isRs.25-30 and for a supervisor around Rs.100 in states like Tamilnadu), this amount will be sufficient to pay wages for about 140000 crores man days. But under the heading EXCESS POPULATION/ LABOUR, for the massive works, the estimated man-days of labour required is only 5165 crores (51650 million). After meeting expenses on wages, there will be large amount of money which can be used for purchase of all the required materials, tools, etc, as also for undertaking other works.

If Japan and USA can manage with large internal debt, there is no reason why India cannot mange with much lower internal debt of Rs.108000 per head. All consequences of inflation etc. have to be tackled as and when they rise, but in anticipation and fear of inflation, internal borrowings need not be limited to the abysmally low figure, thereby depriving the people of work and means of livelihood. Fear of inflation should also not lead to the country’s GDP remaining at a very low level- among the lowest in the world.

From the above it is clear that there is no real shortage of capital and money in the country for undertaking huge projects and for providing buying power to the people

(written about 10 years ago)

(to be continued.)

Telangana

According to the Constitution of India, the Parliament has the power to create Telangana by law. However, the Bill to be introduced in the Parliament has to be referred to the Legislature of Andhra Pradesh (AP) for expressing its views thereon, as the area and boundaries of the state of AP are proposed to be altered. It is not necessary that the Bill should be passed by the Legislature of AP. The Members of the AP Legislature lose the chance to express their views or objection by resigning from the Legislature.

It is for the people of Telangana to decide whether to remain as part of AP or have a separate state. It is not for the people of rest of AP to decide whether unwilling Telangana people should be allowed to have a separate state or not. Of course they have right to voice their objections like how they would be economically affected, how the divided AP would lose its revenue, how they would lose the important institutions that are available in Telangana area, how they would lose their importance by not having Hyderabad as its capital etc. They can seek assistance from Telangana or/and from the Central Government due compensation for their expected loss. They can also seek full access (as at present) to the educational and other facilities available in Telangana area for a specified time- i.e. till such facilities are created in AP.

The Central Govt/Telangana should safeguard the interests of divided AP to the maximum extent possible. But the Central Government should not feel it obligatory to obtain “no objection” from AP Legislature. What the Central Govt should consider now, is not “whether or not” to accede to the demand for separate Telangana state but how to safeguard the interests of divided AP.

India should become a member of IDB

Inter-American Development Bank (IDB) assists several projects in all its 26 member countries of Latin America and the Caribbean – from Mexico down to Argentina. It has 22 non-borrowing members who provide capital. These members include  Israel, China and South Korea. India is not a member. If India becomes a non-borrowing member by subscribing to the capital of the bank, it can become eligible to bid for supplies of goods and services for IDB financed projects.

India is a member of the African Development Bank. In the same way it should try to become a member of the ADB. This would help Indian exporters to export their products and services to projects assisted by IDB in Latin America and Caribean region.