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.

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Global Warming or Weather Extremes

17/09/2009

In the last few years, particularly in the last 3 -4 years, we get the news that several parts of the world had the hottest day in 50 years, 70 years or even in recorded history. This has led people to conclude that there is global warming and that the ice at the poles would melt, leading to the submerging of several island countries. The conclusion is incorrect.

During this same time period, we also read news that several parts of the world experienced the coldest day in several decades or even the coldest day in recorded history. This means that what we witness now is not global warming but rather weather extremes. While estimating the increase in the volume of sea water and rise in sea level, the following need to be kept in mind.

  1. When it is hot in the northern hemisphere, it is cold in the southern hemisphere. Thus the snow melting is restricted to just 50% of the area of snow
  2. When snow melts, the volume of the melted snow, i.e water comes down by around 10%.
  3. During summer, when snow melts and raises sea water level, there is substantial evaporation of sea water leading to lowering of sea water level. Evaporation has been calculated to be higher than the quantum of flow of river water into the sea.
  4. With increased use of surface water, the flow of water into the sea from the rivers is decreasing steadily.
  5. With increasing exploitation of ground water, seepage of seawater into the earth takes place, reducing sea water level.

Based on these points, the consequences of ”global warming” is not so alarming as is made out by some scientists or experts.

However, it has to be noted that the rivers bring into the sea not only water, but also mud, sand, salt and minerals which, get deposited into the sea, thus reducing the quantum of water which the sea can hold. Dredging to the extent possible, extraction of minerals, desalination of sea water for irrigation purposes as well as for other uses including industrial use would all serve to reduce sea water level.