Decentralising

28/07/2017

The Party for Capitalist Economy stands for decentralizing. For the last few years, the trend has been to centralize everything- grant of subsidies directly to the consumers from the central government, admission of students to certain professional courses, deciding quantum of taxes to be collected by the state governments etc. Even the state governments are taking decisions on behalf of private institutes and individuals like fees to be charged by schools from students, cutting trees, age at which one should marry, age at which one should go for jobs etc. The Party for Capitalist Economy thinks that decision taking should be decentralized- Central and state governments should resist the temptation to have more powers and allow private individuals and institutions to decide. There appears to be a need for All India parties like BJP and Congress as well as other parties to debate on the pros and cons of centralizing power.

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Capital,wages,prices,taxes

05/06/2016

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..

 


Onion and Cotton Prices and Government’s response

23/12/2010

Two-three years ago there was bumper crop of onion. Onion prices crashed and in spite of very good crop, the farmers could not make more money than in the previous years. The consumers had very good time. The government did not take any action to give incentives to producers to export onions to ensure that the local prices did not crash. Government kept quiet.

This year, due to heavy rains and other reasons the production has done down steeply. The prices in the local market increased and the farmers who had very poor crop had some satisfaction that the prices are high. But the government would not allow them to be happy. On the basis of consumers’ complaints against high prices, the government disallowed export of onion and allowed import of onions free of any restrictions and without duty. The prices will come down and the farmers would suffer as usual.

While the consumers have good time through out their life, the producers of onions as also other agricultural produce will have bad or not so good time through out their life.

There is no rationale in the government’s action. The argument that due to high prices only merchants profit and not the farmers is not convincing.

The same is the case with cotton and cotton yarn. If producers of fabrics and ready made garments had good time- high profits- when cotton production was high and the prices were low, why not they have low profits or even small loss when cotton prices are high?


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.