Thursday, January 6, 2011

surplus-deficit paradox

1 A.D was an era where the INDIA epitomized the world's economy being the only country where culture and richness were two different diaspora flourished together. Sooner, there came a time where only cultural richness could remain and materialistic richness fossilized. This was the era from where started this paradox. The country is blessed with surplus (at least in theory) somewhere but deficit emanates and engulfs the surplus. The resultant is nullified.
The country in the Apr-Nov quarter of 2010 show a record increase of 27.4% in the gross tax collection as compared to budgeted 18% growth rate by the Finance ministry. The tax collected is Rs.418051 cr this period as compared to Rs.329606cr last quarter. But the fun here is that this surplus is not enough to sustain the deficit which the government wants to settle somewhere around 5.5%. The Fertilizer, Crude oil, Food ministries have already claimed subsidies which are 35%, 102%,450%, more than what was budgeted respectively. With such demanding spheres around and hike in global commodity prices the fiscal deficit seems to widen, let alone stabilization.

Consider the other side of the coin now. With the onion and chilly along with other commodities are getting dearer and dearer, aftermath is that the supposedly poor population is not considering them in their menu anymore. But what poor are we talking about. Is that the urban poor or the rural poor????
Because if it is the urban poor then, they anyways paid a premium because of the intermediaries who charged them extra in the name of logistics and transport from the point of origin to market (which is actually a hoarding premium). Now at least, they are paying for the correct reason. And if it is the rural poor then, its not  bad for them either as, they are getting a premium price for a supply squeeze with is better than surplus production wherein they were not paid the remunerative price even by the same intermediaries.
Thus, the the net off poor is not in that misery for this.
Here again, the deficit is earning surplus for some.

Now consider few other facts.

  • India's Balance of payment is always positive but there is a huge current account deficit despite of it. The deficit is so huge that our currency grew only 3.4% against dollar where Ringgit grew 11.8% and Rupiah grew 4.2%. 
  • India has a dwindling resource of uranium which is hampering its nuclear energy projects but, this is just an excuse for not investing in infrastructure. Not many of us know that the country has 25% of the world's Thorium reserves which is a potential nuclear fuel and is not used efficiently.
  • Despite the fact that we had $25bn of FII inflows last year, yesterday it traded record low @ 45.33 against dollar as dollar still have a heavy demand in the nation (Thanx to the $224bn of external debt we have)
  • India is the world's second largest producer of fruit amounting to around 10.9% of the world's total production but then also 37% of the people of the nation have just heard about these fruits.
  • The country is third world nation but still super powers has to come for sales pitch and employment from us.
  • Above all, we have Ambanis, Tatas, Birlas, and all those richies contributing to the revenue of swiss bank but then also more than 42% of the nation earn less than Rs. 40 per day.( Gini index: 36.8 %).
This paradox and sink of surplus and deficit is in consonance with us and is a part of our life. This probably could be a reason why we Indians can find miseries in riches and riches in misery.

6 comments:

  1. nice thought JD, though I liked the rich-poor analysis part, i would like to add-on one more point on the note of surplus-deficit paradox. India with one billion population which can be called a surplus does not have enough sportsmen to win Olympics gold, Oscars, international recognitions and why we are limiting ourselves to those limited numbers and gets excited about that one gold, that one Oscar, that one Nobel prize...Isnt it a deficit????

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  2. well written JD....but isn't this paradox true for every economy?is there any example has a surplus of everything or deficit of everything?how is it a paradox coz every country has its own share of surpluses and deficits?

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  3. hey JD awesme work yaar....very informative !!!!

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  4. @ rahul...
    Hey rahul. thanx for the comment. Its true that all the country has surplus of something and deficit of some. But i have tried to highlight the paradox in a sense that our country has the same source of surplus and deficit. Everywhere the items that are surplus are amounting to deficit and luckily vice-versa too sometime. We were blissful last @ 1 A.D but since then its offset to trade-off.

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  5. @ manisha
    Thanx a lot for the encouragement. I will try to be more and more informative in my future posts too.

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  6. @ Mohit
    Hey bro. Thanx for the comment.I agree to what u say but my focus in the post was economic rather than social perspective. I welcome your point but will also like to express a suspicious feeling. Oscars n all can't be considered 100% unbiased events n many times many things and results are uncomprehending to me. I agree to the Olympics part of it n thats solely because of the government's negligence to sports persons and academies.
    But what surprises me more is that our country have at least 100 PHDs in every field of education possible but not even a handful of them participate in grass root or tier -1 politics which is dominated by caste politics and bloodbath.And surprisingly these scholars are advisors of many developed nation's governments.
    Our gov. has miserably failed in utilizing its own abundant human resource let alone other resources. Thats the tyranny.......

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