Friday, 22 August 2014

India's basic problem


The basic problem of the country is not how to increase production but how to raise the purchasing power of the Indian masses.

With our huge pool of competent engineers and scientists, and our huge natural resources, we can easily increase production several times. The problem, however, is that of sale of these goods produced. 80% of our people are so poor that they do not have the purchasing power to buy these goods. This is particularly so in view of the high prices of basic requirements like food, which eat up most of the income of most people. Where is the money to buy other goods ? And unless the people have money to buy these goods there will be a glut in the market as the goods will remain unsold.
In classical economics there was a law called Say's Law, named after the French thinker Jean Baptiste Say ( 1767-1832) which said " Supply creates its own demand". This was disproved by the British economist John Maynard Keynes ( 1883-1946) in his famous book ' The General Theory of Employment, Interest and Money' ( in brief known as 'The General Theory'), published during the Great Depression of 1929-1939.

So our thinkers must seriously consider and find out a viable solution to the problem of how to raise the purchasing power of the Indian masses.

22 comments:

  1. If production increases many time price will decrease ? But in India's case production has not increased when compared with increase in population by past generations.

    Also people are poor because they don't know how to use money. They can't find money for their children education or food but can find money for wine/bidi/gambling etc?

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    2. I can have any profile pic that I like?

      I commented on Justice Katju's blog and you are not anyone to form opinion about what type of person I am. I can also say you are like a Dog who runs after every person commenting?

      Also its Bhagavad Gita (and not Geeta) so I can judge your knowlege of Gita learn first yourself

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  2. India does produce lot of food grains,cash crops etc,so it is not production problem,it is distribution problem that needs to be addressed.So without addressing it if we increase purchasing power,it will create an inflationary economy,whats happening today.

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  3. I think, purchasing power should increase. At the same time, production should also increase along with solving the supply chain problems especially the menace of hoarding.

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  4. Menace of hoarding is one of the prime reasons for food inflation.

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  5. yes i agree John Maynard Keynes and india basic problem !

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  6. Sir, you have stated "our thinkers". I hope you mean non-political class. Its unfortunate that there is no competition in political class, every Tom, Dick and Harry has reached positions all the way to Governor's office,. On the purchasing power side, India did have ample purchasing power and they do have it even today. The Labor force are earning more than what they were earning 20 years back. However, the inflation has reached phonominal levels, and now the rupee has less value. The Labor force spend most of the money for just basic necessities. The Government of Tamil Nadu is spending 49% of Revenue for its employees salaries and pensions. Labor Unions in Govt, were able to protest and got ample increase to offset the high inflation. But, only 10 Lakhs are employed by Tamil Nadu Government. The result is that, TN govt spends much less money on other services. Because of that, TN has poor schools, roads etc. In order to mitigate the crisis, it comes with "Amma Restaurant", saying government only can offer food at low price.! More than 50% India's economy is black, so RBI's and Finance Ministry's plans and tools are not effectively working.

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  7. India's biggest problem is corruption. Political parties are the root cause of all corruptions, until we weed out these, our land won't be fertile. http://vishnualluri.blogspot.com

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    1. Vishnu, Do you think that the corruption is the result of flawed Constitution where Citizens were not offered to elect their Executive and Legistlative branches of government in separate elections?

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    2. Sengaiyan, nothing is wrong with our constitution. Democracy is all about distribution and balancing of powers. Political parties create powers centers. But there shouldn’t be any scope for power centers in democracy. The Constitution is getting raped by the Political parties and Politicians every day since its birth. Unofficial dictators are leading the political parties. They corrupted all the institutions and brought them under their umbrella, and controlling all the powers. As per our constitution 543 free will peoples (MPs) are supposed to assemble in lok sabha to rule and make laws, instead few political party heads hijacked our Democracy and they are ruling and making laws.

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    3. I totally agree. But my question is academic one. If democracy is hijacked, that means the framers did not create a strong, vibrant and superior constitution. Constitution should have checks and balances. Why isn't any check placed in India's constitution and what should have been such check?

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    4. Sengaiyan, After independence Supreme Court gone through a phase that it can’t talk freely since the Fathers of our constitution are in Legislature branch. It created a psychological and moral barrier among the Judiciary. Mahatma Gandhi wanted to dissolve the Congress party. But it didn’t happen, as a result we have Nehru dynasty, it led to the current situation. Constitution is strong enough to handle all these issues, our legislature branches utter failure is the culprit to blame. As a society we are failing to elect the right person, we are voting based on political party or cast not based on the candidate’s character.

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  8. Yes you are right..., There is an another way.., Why don't our government create the opportunities to export from India.

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  11. Durosas... dont forget you are also a contributor to overpopulation of our country...and i m sure you will make other country overpopulated very soon.

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    1. I accept. . . but i mean to say people should not populate more, this is going to be a big challenge, how are we going to overcome this?. . . and regarding me populating in any other country, I don't think i will do it anywhere in this life.

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