Simplified economics

On most days, as I enter my driveway in my 2002 Hyundai Santro, returning from a round of golf in the morning at about 9’O clock, I find my neighbor Flourishing Singh (FS) hurrying into his Honda Civic while waving a hurried hi-bye to me. FS who is the CEO of a mid-sized Company is always in a hurry whenever I see him which is not very often. He works 16 hours a day, six days a week. On Sundays he is besieged by his family of 13 - including sons, daughters, daughters-in-law, sons-in-law and grand children – who submit a list of demands ranging from school /college fees to pocket money to sundry expenses. An evening sojourn between FS and me over a glass of whisky, though planned many times, has not taken place even though we have been neighbours for over three years.

We, my wife and I, live on my pension. FS earns five times more, so his GDP is also five times mine. But he has six times more mouths to feed; so the per capita income of his household is less than in our household. Besides, his expenditures are more. His older children (including SsIL & DsIL) refuse to seek employment as jobs offered to them are not commensurate with their stature (they do not bother to improve their skill sets).In addition to feeding and clothing all inmates of his abode, FS also has to give them each a monthly dole for personal needs. FS did make a couple of vain attempts to establish a self sustaining business for his older wards. The only outcome was he lost some money out of his income. He had to hold the family together and keep everyone happy, being its head.. Obviously every year FS ran up a deficit budget. His loans are now more than 60% of his total annual income (GDP). There is now a danger of his creditors taking away his house due to default interest payments.

The milkman, grocer and all sundry service providers want to do business with FS’s household as they see a willing ‘market’ there giving each a considerable turnover vis a vis efforts.  Easy accessibility to these goods has increased the expenses of FS’s house hold most of which is unnecessary.

Last evening a desperate FS came to me. I poured him a drink and we had a long chat. I told him that in order to mitigate the problems of his domestic economy there is a requirement to increase the GDP by augmenting internal accruals. Domestic productivity has to be increased by deploying the free loaders in his family. The freeloaders have to contribute to increase the GDP by seeking whatever employment available to them. He had to cut down on expenses including trading his Honda City for a Santro.  The maid should be packed off and the chores in the house be undertaken by the inmates. Last night, I believe, he read the riot act to his family…

Country	GDP   ($ m)	Population (b)	Per capita ($)	Debt to GDP ratio(%) Higher the ratio, worse for economy)
Brazil	2492908	.2	12,000	66.2
Russia	1850404	.14	13,000	9.6
India	1676143	1.21	1,400	68*
China	7298147	1.34	5,000	25.8

·                     * Note : A positive note is, the external debt to GDP ratio is much lower and has nearly halved in the last two decades. This means the country is not at risk of failing to meet obligations of overseas creditors. The debt service to GDP ratio has also seen a consistent decline over the years.

All the jargons apart; despite planning commission; FDI or no FDI; Monsoon or no monsoon; Corruption or no corruption….our economy will improve only if

1.    The manufacturing base is expanded (for this we have to strengthen core sectors (steel, power, roads, rail, ports r et al) and infrastructure improved.

2.    Ensure inclusive growth by expanding manufacturing away from only cities  to hinterland also.

3.    Improve education system to produce employable youths.