Promoting consumption of milk in India and other countries

10/07/2013

India is the largest producers of milk in the world with production of about 120 million tons (2011). The per capita production comes to only about 100kg per year. USA, the second largest producer of milk with a production of around 90 million tonnes has a per capita production of about 300 kgs while countries like Germany and France produce about 400 kg per head per year.

Milk is one of the few items in which India has higher per capita production than China whose per capita production is only about 30kg. India with a very large vegetarian population should increase per capita consumption considerably. However, with low purchasing power of people, India may become surplus in milk within a few years if the present rate of increase in production is maintained.

India and Pakistan are the major producers of buffalo milk. Production of goat milk is negligible in the world.

India needs to take steps to increase consumption of milk because of its nutritional value. There should be increased use of milk and milk products not only in sweets but also in other dishes. Use of milk and milk products should be promoted in countries like China and Vietnam to whom India could export. Once the Chinese and Vietnamese get used to sweets, there will be huge demand for milk and milk products.


Money, Printing of Currency Notes, Inflation (continued)

30/06/2010

Excerpt from the manuscript “What Ails Indian Economy?”

“In fact, any product, commodity or service acquires value because of the demand. Today, a music system may cost about Rs.50,000. If tomorrow, people are no longer interested in music or there are other ways of listening to music, the music system loses its value. The value of any product or commodity is based on the importance people attach to it, particularly if it is not an essential item like food, clothing and shelter. …..

To understand better, what money is, it would be useful to have some background information. Direct barter system was used in the olden days. It was possible then, as the requirements of the people were limited to, may be food, clothing and shelter. It would not have been very difficult for a person, to locate….. For example in the olden days a person would have grown cereals on his land. The other person would have grown vegetables and a third person would have grown fruits etc. all in the same locality. People knew each other well and the person who wanted to exchange his cereals with vegetables would not have had any difficulty in locating the person who had vegetables to dispose of and at the same time needed cereals.

Sometimes, people had products to dispose of, but they did not need to buy anything at that time. They therefore needed to keep something in exchange for their products. This something has come to be called the money. People used to keep their money in the form of land, cattle, grains and later in gold, silver, copper etc.

In order that goods and services are disposed of and acquired without much discussions, there is need to express their values. Earlier people might have expressed the value in terms of land, grains or cattle or other domesticated animals. People would have talked of wages of a worker in terms of units (weight or volume) of grain. They would have talked of value of some area of land in terms of cattle-10 cows or 20 cows etc. But now the value of goods and services are talked of in terms of currency -rupees or pounds or dollars or euros etc.

People are willing to exchange valuable goods and services for printed small sheets of paper- currency notes, because they know that other people would accept these papers in exchange for their goods. The currency notes thus acquire value. The same is true of gold…….

 (to be continued)


Credit Rating Agencies-Is there a need?

30/05/2009

India has allowed western credit rating agencies to operate in the country. It has also allowed the establishment of local credit rating agencies. Government of India and regulatory authorities including Reserve Bank of India and Securities and Exchange Board of India recognize the ratings of these agencies. People also give consideration to these ratings in taking decsions on investments. How do the agencies come to conclusions about the financial strength or weakness of a company  and how can one rely on their findings?

First of all, it is not possible for any agency to rate any manufacturing or financil services company correctly. Secondly, how can one be sure that its ratings are not subjective? Can the rating agency prepare any report on a company without the company’s full cooperation? Will the company provide any information which will show it in a bad light?

Reserve Bank of India and a few research organisations estimate the national GDP to the accuracy of 0.1% i.e say 5.7% or 5.8% and keep revising the same. When it requires the entire government machinery to estimate GDP to the accuracy of 0.1%, how can any smaller organisation or institution do it? At the most one can say that because of good rains, the agricultural production may go up by 10 or 15%; the production of fertilizers, pesticides, agricultural implements etc. may also go up by 5% or 10% etc. If there is increse in wages of the entire working class, one can predict that the demand and hence production of consumer durables may also go up. But no agency can estimate that the economy of a large country like India can grow, say  by 7.1% or 7.2%.

The ratings of the agencies is creating havoc in stock markets. Many companies abandon proposed projects which affects the growth of the economy. There appears to be a need to seriously consider whether there is need for the credit rating agencies.


Stimulating the economy

04/02/2009

There is economic slow down in most of the countries currently i.e. early 2009. These countries try to stimulate the economy by

  • Lowering interest rates
  • Giving tax benefits
  • Offering incentives to industries

By lowering interest rates for housing loans, vehicle loans etc. the governments try to encourage people to avail of the loans which in turn leads to construction of  houses, production of vehicles etc, thus reducing unemployment. But at the same time, people who deposit their money in the banks receive lower interest and thus the disposable income with them comes down leading lower consumption expenditure- lower retail sales, low demand and low production.

Giving tax benefits would make the companies and individuals to have additional money, but the governments would lose tax revenue and thus will not be able to undertake large infrastructural work.  Instead of reducing taxes, the governments can undertake infrastructural work and generate employment and additional spending.

Offering incentives would again reduce the government funds. It is likely that many of the industries would reduce the ex-factory prices of their products.  They would however result in lower cash balance with the governments and  lower government spending which is not good for the economy.

Cost of the production should be reduced by increasing the productivity of the employees. This could be done by requiring employees including the top managements in all the establishments in the country as well as self employed persons to work for additional one hour a day without any increase in salary.