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..

 


couplets

01/04/2016

Borrowing even from friends with large money
is wrong if without interest any

Contributing atleast labour to those who help with cash
is the character of people of culture class

Who think not exploiting others while having ability
and ample opportunity are examples of nobility

Real affection and culture do not differentiate
nationality, race, language,gender or age

Lazy people’s success and hard workers’ defeat
can be whatelse if not fate?

Happiness in giving, reluctance in taking is nature
of the people of highly developed culture

 

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Onion- price should be around Rs.30/kg

08/11/2013

Onion is cultivated on an area of 43 million hectares in the world. The production is about 86 million tonnes with an yield of about 20 tonnes/ha. India has the largest area of 1.1 million ha or over 25% of world acreage under onion. However, India’s contribution to world’s production is only about 16 million MT or about 18%. The yield in India is only about 15MT/ha against about 25MT/ha in China. Countries like Australia, Austria, Germany, Ireland, Netherlands, South Korea, Spain and USA have yields of over 50 MT/ha.

The production in India is low as the farmers do not get remunerative price. The consumer price of RS.50 or Rs.60/kg is not at all high. But unfortunately there is hue and cry from political parties, trade unions and the consumers against this price. People should be allowed to be used to this price.

India exports onions at about US$400 per MT or Rs.24 per kg. If the farmers get price of Rs.30 per Kg, there will be incentive for farmers to grow more and supply to the local and foreign markets. There is a demand for onions in USA, Brazil etc.


Rates of Exchange and Exports

20/10/2013

It is generally believed that when a currency is upvalued(revalued) it would affect exports as the export items would become costlier. This is not really true. When the currency is revalued, imports become cheaper and cost of living comes down. The local currency gets strengthened. In 2005, Chinese Yuan RENMINBI(CNY) was USD 1 = CNY 8.09. Since then the CNY has appreciated and now USD 1 = CNY 6.09. With the appreciation of CNY exports did not decrease. On the contrary, exports from China when up from USD 939 billion in 2006 to USD 2,057 billion in 2012. Indian exports also went up from USD 122 billion in 2006 to USD 298 billion in 2012. The Indian Rupee also depreciated from USD 1 = Rs. 45 to USD 1 = Rs. 60. Here the depreciation is not the main reason for the increase in exports. Even without the deprecation the exports went up to USD 198 billion in 2008. So while fixing the rate of exchange the purchasing power of the respective currencies should be taken into account. The main contributing factor for increase in exports is surplus production, lower cost of production and the quality of products. A currency should not be allowed to depreciate thinking that this would contribute to increase in exports. The rate of exchange between Indian Rupee and US Dollar should be USD 1 = Rs. 20 or Rs. 25.  

 

Author: Singharan Govindan


Food Security-production of food grains should increase

26/08/2013

Food Security is wrongly understood by planners. Food security means keeping adequate stock of food grains in the market. While countries where climatic and other conditions are not favourable for agriculture, the governments should ensure adequate stock in the market by facilitating or directly importing food grains. In countries like India food security means facilitating production of adequate food grains by making farming a profitable profession i.e. by ensuring fair prices for agricultural produce. At the same time government should ensure work with fair wages for all adult people. Even the disabled should do jobs according to their ability. The only fields where government should provide services free of cost or at subsidized rates are health and education. This is because, these services at times can become unaffordable for people.Food grains need not be supplied at subsidised rates.

Economy can grow only when the production of goods and services grow. This can happen only when all adults work.


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.


Production, yield and per capita availability of fruits

21/07/2011

Excerpts from “Simple Alternate Development Strategy”

“India is the second largest producer of fruits in the world behind Brazil In 1991,it produced 28 million MT or 8% of the total world prodution of 348 million MT. Per capita production of fruits in India was 33kg/year against ….65kgin the world. India produces mainly mangoes(10 million MT)and banana(6.4 million MT). It does not produce much of the other fruits which are major ones in the world like grapes, oranges, pine apples etc. For example, its production of grapes at 314000 MT in 1991 was only 0.5% of the total global producion of 57 million MT. However, in grapes, the yield is significant at 20.9 MT/hectare against…world aveage of 6.8 MT. This is because, the entire area under grapes cultivtion is under irrigation. more than anything else viz high yieldig varieties, fertilizers,pesticides etc.though these are important inputs. Major producers of grapes are Italy, France, former USSR and Spain,the four together accounting for 47% of the world production.

Another major fruit in the world is orange. The world production in 1991 was 55 million MT,closely behind that of grapes. India is not a significant producter.Its productio of 1.89 million MT accounts for only 3.4% of world production. The major producers are Brazil (34%) and China (9.7%)

Banana is another major fruit with a production of 47.7 million MT in 1991.The leading producers are India (13.4%), Brazil(11.8%),Philippines(7.4%), Indonesia(5.0%) and China(4.4%). In spite of being the largest producer of bananas, the per capita availability is only 7.3% kg per year while the world per capita availability is 8.8 kg and the per capita production of the rest of the. world(i.e,excluding India)is 9.14kg…..

The fourth important fruit in the world is apple whose production in 1991 amounted to 39.4 million MT.India’s production of 1.02 million MT comes to only 2.6% of world production. The major producers in the world are former USSR(15.2%),China(12.2%) and USA(11.4%)…..

Mango is the fifth important fruit in the world, production of which amounted to 16.12 milliom MT. Out of this, India’s production was 9.70 million MT i.e. 60% of the world production. Mango is perhaps the only item in which India has a dominat presence in the world. The per capita poduction comes to 11kg per year.

In pine-apple, India’s contribution was 700.000MT to the world production of 10.08 million MT. It comes to 6.9% ofthe world production.”

India’s production of fruits has gone up now to around 32 million MT, but its share in the world remains more or less same i.e.8%. India needs to double its production of fruits,if Indians are to consume on an average as much fruits as the rest of the people in the world.


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.


Price rise in India

13/08/2010

Both the rightist and leftist political parties blame the central government of India for the price rise. Almost all the political parties continuously demand increase in wages of all workers and employees-agricultural workers, textile workers, factory workers, bank employees, government employees, public sector industrial workers etc. and the wages and salaries keep increasing. Not only this, the political parties also demand more regulations on working hours-shorter work time. This means lower production. When production/productivity is low and wages keep increasing, it is natural for prices to keep going up. The prices would have gone up, whichever party had been in power.

 20-30 years ago, one should have been seriously concerned about sufferings of unemployed and under employed people consequent on price rise. But now, the issue before the country is not unemployment or under employment but of shortage or acute shortage of labour on all fronts- agriculture, plantation, industry, construction, service sector, trade, petty business, domestic work etc. The labour shortage is felt both in urban and rural areas. If the employment exchanges show increasing number of registrations, it is only due to unwillingness of people to take up jobs which do not require their educational qualification. If prices increase, people can think of taking up available jobs, working over time, doing two jobs (one full time work for 6 hours and one part time work for 2-3 hours. Agricultural workers and others in rural areas work only for 5-6 hours). This will incidentally minimize the labour shortage.

Longevity has gone up. Pensioners are getting pension for longer period now than before. One way of curtailing price rise will be to increase the age of retirement by about 5 years thereby increasing the availability of workforce.

School education could be curtailed by 1-2 years and university education by six months-one year. This will make available more number of people for work which will increase production.

In this connection, it may be relevant to mention that the government while prescribing minimum wages for workers in particular sectors should fix wages per hour instead of per day.


Gold will not be precious for long

06/05/2010

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.