Guyana-India Economic Co-operation


Gold is the main item of export for Guyana contributing over 40% to total exports. India is a very large importer of gold. India should explore possibilities of import of gold directly from Guyana , if necessary by undertaking of refining etc.

The second major item of export of Guyana is Rice. Guyana has large uncultivated but cultivable land. Indian companies can lease land for cultivation of Paddy, set up rice mills and increase exports of rice from Guyana. Guyana’s trade deficit can be wiped out.Indian companies can earn good profits as Guyana has fertile land and abundant rainfall.

Sugar is the fourth largest item of Guyana’s exports. Here also Indian companies can set up sugar mills and also lease land for cultivating sugarcane for feeding the mills. With increased sugar production, there will be increase in the production of molasses which can feed Rum factories. Guyana’s Rum is famous and Indian companies can produce and export Rum from Guyana.

Guyana also produces and exports rough diamonds and India is a large importer of this item. India can directly import diamond from Guyana .India can also explore possibilities of diamond exploration.

Some of the items which Guyana can import from India are: motor vehicles , including cars, sugar machinery, agricultural machinery like tractors, harvesters etc.Guyana consumes wheat but does not produce the same. Guyana can import wheat/wheat flour from India. The quantity will not be huge as the total population of Guyana is less than one million.

There are also possibilities for cooperation between the two countries in laying railway lines in Guyana and construction of bridges across rivers

Indian Economy


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.

Guyana- easy and quick way to increase per capita income.


Guyana is a midsized country in terms of area, with about 215000 sq.kilometres. However in terms of population, it is a very small country with a population of only about 750000 which works out to a density of less than 4 people per sqkm. The world average is about 14 people per Guyana has fertile land, receives good amount of rainfall with a number of perennial rivers.The country can easily sustain a population of over 10 million, but unfortunately, the population is declining by about 0.5%.(mainly due to migration to USA, Canada)every year. This is why,the country is unable to exploit its natural resources like land, rainfall, bauxite, gold etc. Its per capita income is only about US$7000/- Guyana can raise its per capita income to about uS$15000/- within a short period of about 5 years, if the goverment leases out just 2 million hectares of its land to foreigners.The population may increase to about 1 million and the GDP would go up to about 15000 million.

Money, Printing of Currency Notes, Inflation (continued)


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)

Money, Printing of Currency Notes



Excerpt from the manuscript “What Ails Indian Economy”

“Now the question arises as to from where the country will get money to undertake the works mentioned earlier. (large infrastructural projects of roads, railway lines, electricity generation and transmission, telecommunications, sanitation, housing). To answer this question, it is necessary to understand what money is. We now buy goods and services with currency notes and coins. These currency notes and coins are called money. W can also buy goods and services with Bank cheques and hence these bank cheques are also money. Of late, credit/debit cards are increasingly used to buy things. Hence these cards also qualify to be called money. Already, in many countries coins are not in circulation. After a few years, even currency notes may become rare and in next few years/decades even cheques would become rare and the credit/debit cards would be the main form of money. There may be new instruments in future which one is unable to guess now.

 What is said above means that money is not a product or commodity. It is a concept only. As of now, it is mostly just sheets of paper (currency notes) which are accepted by the people on certain guarantees of the government of the country or issuing bank as a medium of exchange. Thus for a Government, money can never be short s it can print as much currency notes as required.

There will be a lot of arguments against printing of currency notes. Some may talk of stock of gold against which currency notes are to be printed. These people may that gold has value as metal/product. But this is not correct. If people do not attach importance, gold will have no value. For example, if tomorrow the ladies prefer to have ornaments in plastic, instead of in gold, or if thy do not want to wear any jewelry at all, gold loses its value. If the governments do not want to hold it as stock, it loses its value. When the British government was no longer interested to keep large reserve of gold and sold some quantity, the value/price of gold came down.. (to be continued)

Gold will not be precious for long


According to rough estimates the total world gold holdings of the central banks of the countries and the private individuals are around 150,000 metric tonnes. Production of gold was highest in the year 2001 at around 2600 tonnes.  Since then production went down to 2350 tonnes in 2008. Annual increase in gold holdings thus comes to around 1.5%. Against this, world population growth is only about 1.2%. 

The population growth is high i.e. over 2% mostly in developing countries like Ethiopia, Congo, Sudan, Tanzania, Kenya, Afghanistan, Uganda etc. The gold purchasing power of the people of these countries is low and hence the gold requirement in these countries will not increase significantly. On the hand, in developed countries where the gold purchasing power of the people is high, the population growth is negligible or even negative. Developed countries like Japan, Germany, Italy and the east European countries have negative population growth.  Even in high population growth countries, the poulation growth is likely to come down as the economies grow. Thus world population growth is likely to stabilize at less than 1% in the next10-15 years.

As the price of gold which used to be less than US$300 per ounce in 2000, has gone up to nearly US$1200 in 2010,  the gold mines which used be unviable earlier are likely to become viable. The production of gold is therefore likely to increase.

 If the central banks do not buy from the producers and allow the producers to bring gold into the markets, price of gold will keep coming down. Thus gold will gradually become less precious.  In this context, it is good not to keep money in gold.

What goes around, comes around


During the past few years till 2007, the economy of almost every country has witnessed significant growth. According to data from the International Monetary Fund, global GDP grew from around US$51 trillion in 2004 to around US$65 trillion in 2007 – more than 25% in 3 years. The GDP growth rate in 2007 was 5%, which is considered to be a good rate. The economies of developed countries, such as tthe US, Japan and those  of the European Union, grew by 2- 3% in 2007. This is solid given the large base of these countries. In the case of developing countries, such as India and China, growth rates of 7-10% are considered solid given their low base. These  countries have registered such growth rates over the past 4-5 years.

GDP growth rates peaked in most countries during 2007 and since then there has been slower growth. It is important to note that most countries are witnessing a decline in growth rate, not negative growth. The decline is expected to last for the next 2-3 years before the trend is reversed. The Indian economy registered a growth rate of over 9% in 2007 and despite news of an economic crisis,  the economy is expected to grow at around 7% in 2008. The US economy grew 2.2% in 2007 is expected to decelerate to less than 2% in 2008. In 2009, even if the growth rate is less than that in 2008, it should not be cause for alarm. For a large , developed economy, even a 1% growth rate is positive considering population growth is less than 1%. So in this perspective, the current economic situation is less of a crisis and more a slowdown. The sensational news stories of  economic meltdown are exactly that, sensational. The actual concern should be on the future and how growth rates develop over the next few years.

The stock market situation is somewhat similar in its lack of fundamental change. Take for example the Bombay Stock Exchange in India; its Sensex benchmark rose from around 10,000 in early 2006 to over 20,000 in early 2008, doubling in 2 years. Naturally, such an increase motivates initial investors to take profit by selling their shares. The Sensex is again around the 10,000 level. I expect investors, both new and old, to start entering the market at this level. We have to remember that since 1978-79 when the Sensex  was at 100, the index has reached to 10,000 in 2008, a 100-fold increase in 30 years. The price of gold has increased only by 20 times in the same period.

I believe that both the global economy and stock markets will face pressure in the short term, with industry being hit. However, with prudent intervention, I believe long term trends are positive.