Profits, salaries,wages,prices,money,physical strength

26/09/2012

There seems to be wrong notions about wages, prices, investment, development and related issues among the people,political parties, intelligentsia etc.

Some of the wrong/irrational notions are:

i. that if profit is substantial companies’ management can enhance the salaries of top executives exorbitantly rather than think of reducing the prices of products/services in the coming years.( The government should consider imposing a limit on salaries/perquisites of top executives as in the past)

ii. that if there is profit, the companies should share it with employees by giving bonus to them rather than reduce the prices in the coming years or invest the money to produce and employ more

iii.that there should be universal which means additional employment but there should not be inflation

iv.that procurement prices of cereals,milk, eggs etc.should be increased but consumer prices should remain unchanged.

v.that wages of agricultural labourers should keep increasing but prices of vegetables and fruits should not go up

vi.that workers should not be asked to improve productivity but prices of manufactured goods should come down

vii.that wages of workers,drivers,cleaners, engineers,mechanics, office staff etc. should be increased periodically but the train and bus fares, electricity charges,cleaning charges, etc should not be increased

viii.that charges for any service should not be increased but the quality of service should be enhanced.

ix. that people should have more entertainment, comforts, luxuries etc. but need not put in additional labour.
(People do not think that while money not spent on any occasion can be saved and spent on other occasions but physical strength can not be saved for using on some other occasion. It is therefore necessary that one should work as long as possible when the opportunity comes.)

religious,social leaders,writers etc. talk of virtues of people with money giving charity to poor people,but nobody talks of people who are physically strong and healthy, helping physically weak people.

people talk of short duration of prosperity but they do not talk of shorter duration of physical strength.

money not spent can be invested for development, for creating jobs etc. while physical strength not used, for doing work cannot be put to any other use.

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China’s economic develoment

20/02/2011

China’s economic development in the past 30 years has been phenomenal. It has overtaken several countries including Germany and Japan to become the world’s 2nd largest economy(GDP US$5.7 trillion). It has become the largest exporter in the world. There is discussion already,on when China would overtake USA(GDP US$ 14.6 trillion) to become the largest economy. However, it appears that China may not overtake USA in GDP, in the near future, as its development is based on weak foundation:

a. unlike in countries like India, in China, the contribution of foreign invested companies to the GDP is very high- about 40%. Foreign direct investment in China is nearly US$ 1 trillion.

b. contribution of foreign invested firms to china’s foreign trade is over 50%

c. if foreign firms withdraw, China would lose its position as the 2nd largest economy and the largest exporter. GDP growth rate would also fall substantially from the present
level of around 10%

d.China’s investment in research and development is low- about 1.5% of its GDP, compared to 3% in USA. It depends on foreign countries for technology.

e.arable land in China is limited-only about 140 million hectare(just about 15% of total area) for its population of 1350 million. USA has about 175 million hectares for a population of about 300 million.

f.agricultural land is over exploited with high input of fertilizers. Soil degradation is likely to lead to drop in agricultural production.( China has however done a good thing in leasing large areas of agricultural land in Africa.)

g. natural and man-made calamities take place more often in China than in many countries.

While the achievement of China in the last 30 years is adorable, it may also have to be noted that this has been possible because of foreign assistance, which means foreign developed countries also have contributed to the progress. Of course, the foreign countries have benefited enormously from their investments.


World Food Situation- No need for alarm

22/01/2011

Food situation in the world in general and in Africa in particular is not as alarming as the protests against food grain prices in several countries, as also the warnings by FAO economists suggest. Low production is a very serious matter which defies solutions but price increase is not impossible to be tackled by increasing/extending subsidies, loans etc. While main food grain producing countries have witnessed slight decline of less than 1.5% in production,(less than 10% of carry forward stock) most of the African countries like Ethiopia, Eritrea, Kenya, Malawi, Niger, Somalia, Uganda, Zimbabwe etc. have recorded higher production in 2010 than in the previous year. Higher prices in 2010 for food grains are likely to lead to a higher production in 2011, as farmers will be encouraged to try to produce more, by higher income. The lower production of food grains in main producing countries will only mean lower stocks being carried forward to the next year and not non-availability of food grains.

It is also heartening to note that wages in most of the African countries have increased during the last few years and thus people have more money to meet the higher food grain prices. It is also pleasing to note that among the 20 fastest growing economies in the world, as many as 11 are in Africa. In other world, out of 53 African countries, 11 are witnessing very high economic growth rates. (Among the 140 non-African countries, only 9 are witnessing high growth rates.). Thus, the people will be able to absorb the higher prices without much difficulty.

From the long term view also, India alone has the potential to double its production of food grains from about 225 million tonnes to 450 million tonnes. If India achieves just 50% of its additional food grain production potential, the world will not have food insecurity at all. Even without bringing in additional land under cultivation, Africa has the potential to double its production, as its yield is very low. What is required is substantial investment in irrigation projects.


Indian Railways

28/02/2010

It is said that for the last 7 to 8 years, railway passenger fares have not increased. This is not necessarily efficiency. This is not an achievement to be proud of. In the last 7 to 8 years, prices of inputs, steel, raw materials, consumable stores, diesel & other fuels and wages have gone up, some by 100%.  The passenger fares should also have gone up. By not raising the fares, the Railways has forgone a huge amount with the result that developmental works could not be undertaken as much as possible.

The Railway Minister has repeatedly mentioned in her speech that due to financial constraints several works could not be undertaken. Had the fares been increased even by just 10%, (there is justification to increase by higher percentage), Railways could have earned nearly Rs.10,000 crores (Rs.100 billion) more in the last 7 years, which would have enable it to undertake expansion projects. There is need to install escalators, to cross the lines and this could have been undertaken with the additional revenues.

The train fare in 1970 from Chennai to New Delhi used to be around Rs.60 and it has now gone up to around Rs.600, i.e. 10 times in 40 years. During the same period, per capita income in India has gone up by more than 100 times.

Government of India has invested a huge amount in Railways. If revalued, the value of Railways assets – land, buildings, machinery, rails, rolling stock, consumables etc. would be a minimum Rs.1,000,000 crores. Government’s investment in the Railways would be even more than this as for several years, Railways have been incurring loss. At 10% of the investment, Railways should pay dividend of more than Rs.100,000 crores to the Government but it pays only around Rs.66,00 crores. Even after more than 150 years, it is seeking budgetary support from General Revenues. These do not show efficiency.

Thus there is no reason for the Railways for not increasing the fares.


India’s membership in regional/international groups

20/06/2009

In the past India used to be a member of the United Nations, Commonwealth and Non-aligned Movement. But now, one has lost count of the number of organizations or groups in which India is a member or with which India is associated with. Of course, some other countries also have become members of many regional groups, but in the case of India, some of the groups do not seem to be natural. In some cases, there is more to give than to take.

India spends a lot of time and energy of not only the officers but also of Ministers and Prime Minister and President in preparing for and attending the numerous meetings and summits. When more important and urgent work is awaiting VIPs and VVIPs in India, they are made to travel to foreign countries to attend to these meetings. India already has its Embassies and High Commissions and has good bilateral relations with the members of the groups. India can deal with the individual countries without additional efforts through its Missions.

It is time to review the usefulness of India’s membership in or association with some of the following groups in terms of additional trade, investment, political support etc.

  • Bay of Bengal Initaitve for Multi-sectoral Technical and Economic Cooperation (BIMSTEC)
    • Member countries: Bangladesh, India, Myammar, Sri Lanka, Thailand, Bhutan, Nepal
  • Indian Ocean Rim Association for Regional Cooperation (IOR-ARC)
    • Member countries: Bangladesh, Sri Lanka, Iran, South Africa, Indonesia, Thailand, Tanzania
  • India, Brazil and South Africa Diaglogue Forum (IBSA)
  • Brazil, Russia, India and China (BRIC)
  • Shanghai Cooperation Organization (SCO)
    • Member countries: China, Kazakhstan, Kyrgystan, Russia, Tajikistan, Uzbekistan (India has observer status)