reducing/eliminating unemployment

15/04/2019

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.


Demonetization- should it be put to plebiscite

24/11/2016

There are different claims about the support or opposition to the scheme of Govt.of India of demonetization of Rs.500 and Rs.1000 currency notes being implemented by the Government. Opponents talk of the damage to the economy, the GDP lowering by a few percentage points with no success in bringing out black money, in eliminating fake currency notes or in eliminating corruption. And they also talk of untold suffering of the people, with no money to buy essential items of consumption and the loss of lives of several people. They demand withdrawal of the scheme. At the same time while admitting the sufferings of the people, the government asserts that the suffering is only for a short period, but there are long term gains in terms of elimination of black money, fake currency notes and corruption and assert that the scheme will continue. The issue being very important and serious, it should be put to plebiscite and the outcome of the plebiscite should be respected and implemented and no further discussions should take place on the issue.


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..

 


Life Expectancy in India and neighbouring countries

14/09/2014

Life Expectancy at birth in India increased from 58.5 years in 1990 to 64.19years in 2010 but it is still below the world average of 67.88 years, according to UN POPULATION PROSPECTS 2010. India ranks 146th among 198 years.All the neighbouring countries have higher life expectancy than India as seen below.

India 64.19
Pakistan 64.57
Bhutan 65.79
Nepal 67.42
Bangladesh 67.84
Sri Lanka 74.25
Maldives 75.55

Japan with life expectancy of 82.73 years ranks no.1.Life expectancy depends on diet, medical facilities, accidents, climatic conditions etc. The fact that some people in India live upto 100 years shows that climatic conditions are alright in India.

India’s per capita production/ availability of food grains is only around 200 kg per year (260 million MT for 1270 million people) while the world average producion is over 350 kg/per head/per year. India should stop thinking that it is surplus in food grain production.

Though India has excellent medical facilities in several cities,the overall expenditure on health in India is only around 4% of GDP while Sri Lanka and Maldives spend around 8% of their GDP on health. Japan and other developed countries spend around 10% of their GDP on health.It is to be noted that per capita GDP in India being lower than than in Sri Lanka and Maldives(less than half), in absolute terms expenditure on health per person in India is very very low.

If life expectancy at birth in India is to go up substantially, food grain production should increase and per capita expenditure on health should increase significantly.


Rate of exchange between dollar and rupee

28/09/2013

The Finance Minister is reported to have said that the correct rate of exchange between US$ and Indian Rupee is US$1= Rs.59 or Rs.60. This does not appear to be correct.

The wages for an hour of an unskilled worker on an average is about US$ 8/- in United States.In India it is about Rs.50/’ In this case US$ 8= Rs.50 or 1 dollar is equal to about Rs. 6.25. A cup of coffee in Food Courts on average costs about US$1.00/- In similar establishments in India, it is about Rs.30/- In this case 1 US dollar is equal to Rs.30/- Average price of 1 litre of milk in US is about 1 dollar. In India, it is about Rs.30. In this case also 1 dollar is equal to only Rs.30/- Of course in manuufactured goods, 1 dollar may be equal to Rs.40 or more. Taking all the products and services (GDP) in India, IMF/World Bsnk etc.estimated in 2012,India’s GDP to be around 5 trillion dollar by Purchasing Power Parity method and nearly 2 trillion dollars by rate of exchange method The rate of exchange in 2012 wad about Rs.50 per dollar. This shows that the real parity between dollar and rupee in 2012 should have been only Rs.20/dollar. in 2013 it could be about Rs.30/-.


Bringing more people in the work force

18/04/2012

In the past -in 50s and 60s,the minimum qualification required for admission to most of the trades in Industrial Training Institutes (ITIs) is pass in 8th Class,while at present only for a very few-one or two-courses the minimum qalification required is 8th Class,while for the rest, it is 10th class. Similarly one could go for Teachers Training course after passing 8th class, to be able to teach in primary schools, while at present it is pass in 12th class. With a view to bring more people to work force, it would be useful if minimum qualification required for admission to ITIs and Teachers’ Training Institutes is brought down to 8th class.

Similarly,there was a category of doctors who spent just 3 years after school education to become doctors. This course should be revived.

The school education now consists of 5 years of primary education, 3 years higher elementary education,2 years high school and 2 years higher secondary school edcation, making a total of 12 years. This can be reduced initially to 11 years and later to 10 years. One should go for university education- degree course in Arts, science,medicine etc after completing 10 years of school education. Thls will make available to the country about 10% additional work force.

In India, life expectancey at birth has increased to about 67 years now (2011)from around 32 in 1951. Correspondingly the retirement age should also go up. It would probably be just to increase retirement age to 65.This alone will increase the strength of the work force by about 10% – 15%

The larger the work force the higher the GDP of the country. One of the reasons for higher Per capita GDP in developed countries is that over 65% of the population there work.Similarly one of the reasons for lower Per capita GDP in developing countries paticlarly the ones in Africa is that there the work force is less than 50% of the population,mainly due to high birth rates.


Overvalued and undervalued currencies

15/04/2012

In India Rs.25 can get one kilogram of good quality rice. In United States of America US$ 1 can buy one kg of comparable quality of rice. The rice being same in both cases, US$1 should be equal to Rs.25. But one can get in the banks or elsewhere about Rs.50 for 1 US$. This means that Indian Rupee is undervalued by 2 times. In some other cases 1 US$ may be equal to Rs.50 or Rs.20 or so. When we take the value of the total production of goods and services, i.e. GDP.we get an idea of how much the currency of a country is undervalued or overvalued. International Financial organisations like IMF, compute the GDP of a country both in nominal terms ie. on the basis of rates of exchange and on Purchasing Power Parity (PPP) terms. From these figures we find that while currencies of most of the developed countries are overvalued, the currencies of the developing countries are generally undervalued.

The major countries whose currencies are undervalued are:

1.India by 2.8 times
2.Iran by 2.2 times
3.Taiwan by 2.2 times
4.China by 1.9 times
5.Mexico by 1.7 times
6.Russia by 1.6 times
7.South Korea by 1.6 times
8.Poland by 1.6 times
9.Turkey by 1.6 times
10.Indonesia by 1.6times

The overvalued major currencies are those of:

1.Australis 1.4 times
2.Canada 1.2 times
3.Japan 1.2 times
4.Italy 1.2 times
5.France 1.2 times

In the past Indian Rupee was undervalued by 3-4 times. As the economy expands,the currency becomes stronger. May be in the coming years, as the economy expands,Indian Rupee may not be so much undervalued as now. This will mean that the imported goods may not be so much costly as now.


Indian Economy

04/10/2011

Indian economy is quite sound as can be judege from the following:

i. there is no unemployment or the unemployment is very low now, compared to what it was in the past. In fact there is shortage of labour in every sector of the economy- in agriculture, industry, plantations, transport etc. Shortage of labour is seen both in the urban and in rural areas.
ii. production is increasing as can be seen from the increasing number of trucks moving goods across the country
iii. industry has no problem in getting finance, either by way of equity or loan from banks or other financial organizations-postponement of initial offerings by companies does not mean that the public are not interested in buying equity shares. It only shows that the prices of the offerings have been placed high.
iv. there is no dearth of loan facilities for agriculture
v. finance for acquiring vehicles is available from a large number of organizations
vi. there is no problem in selling products/commodities, (though sales promotions are required. ) This is because of higher purchasing power of people in general.
vii. the expenditure on food as a percentage of total expenditure f the households is continuously decreasing showing an increasing number of products being used by the people. This shows higher standard of the living of the people.
viii. prices are going up, but wages have already gone up and still are going up. Thus,price increases is not a major problem. For example, between 2006 and 2010 wages have gone up by about three times in most l cases. On the other hand, prices have gone up by 50%- 100% (which has resulted in higher standard of living of the people).
ix. people no longer walk even short distances. They use mopeds,motorbikes and cars. Very few people use bicycles. People are in a position to afford these luxuries now. They even travel by motorbikes for even the currently “low” paid jobs.
x. there is no communication problem now. Most of the people have cell phones.
xi. the markets are full of things –food items as well as industrial products.
xii. stock markets are volatile. Price of gold and silver is increasing,but this cannot be called economic crisis,but can only be called speculative activity. If FIIs are banned ,institutional investors are restricted in the secondary market, the markets will be steady.
xiii. however, there is a lot of scope to increase productivity, increase consumption and thus, expand production and GDP.
xiv. interest rates have gone up leading to higher cost of production, but the prices of all products have also gone up .Thus,the purchasing power of the interest amount from the deposits in banks,etc. Would have become lower, if interest rates are not raised. In other words, depositors would have suffered badly.
xv. there is shortage of labour. This can be solved by increasing mechanisation. In agriculture for example, mainly ploughing has been mechanised. There is scope of mechanisation in planting, weeding, harvesting,thrashing,etc. In industry also, there is a lot of scope for further mechanisation. This is how industrial revolution took place in Europe a few centuries ago.
Xvi. The problem of pollution should be tackled with proactive participation of the government.
xvi. Global warming is talked about but we are witnessing coldest winters and hottest summers which can rightly be called weather extremes rather than global warming.
xvii. higher public/government debt in itself cannot be an economic crisis if the debt has been incurred for productive purposes and the labour productivity remains high. after all, money can always be created by the government monetising debt.
As the fundamentals are strong in Indian economy, external happenings should not affect it. However, it does affect because of speculative activities. It would good to control speculations.


Labour Shortage- measure to ease

07/06/2011

There is an acute shortage of labour in every sector in India. However, in the name of welfare measures, government of india and the state governments are taking away a lot of people from workforce, thereby enhancing shortage of labour and curtailing growth in GDP. It is time the governments consider seriously the following measure to augment the work force

a. increase the age limit for giving old age pension from 60 years to 65 years and above

b. reduce the agelimit of children for employment

c.some kind of discrimination against able bodied people who refuse to work-in the matter of grant of freebies,concessions,

d.increase the working hours to atleast 8 hours a day in sectors where it is lower than this like in agricultural sector

e.strict punishment for petty thefts, trespassing by people,cattle etc, so that unproductive labour by watching (watchmen’s work) could be moved to productive sectors

f.motivating people to be sincere in and committed to work, so that the supervision could be minimised and supervisors could be employed more productively

g. curtailing freebies so that people would be forced to put in more work to earn more to meet the anticipated special expenditures on occasions like festivals, marriages, pilgrimages etc


Money, Printing of Currency Notes, Inflation (contd)

30/06/2010

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.)