Price rise in any economy is not good.India is presently overheated economy.Every one knows that but out of sheer greed and to ape western lifestyle and luxury we are all acting blind including our so called economic experts and politicians.
Government has yesterday increased repo rate and CRR which are old and outdated traditional Keynesian model tactics which don't hold good any more.Moreover even symbolic effect will come after a month or so.
Both banks and traders have become smarter and they know how to circumvent such measures by RBI.
These half hearted and peanut approach should be abandoned and more radical and structural improvements are required in India throwing West borrowed Manmohan Singh Ji's economics which is utter failure in India in last 8 years.
Truth is bitter.Indian model currently followed is not sustainable as it is not sustainable in China or USA too.The countries are facing huge problems.The bad acts of greedy bankers, real estate developers and MNCs are manifested by one after other revelations about illegal acts by companies like Goldman Sachs.
First let us see why prices have gone up and are going up?
1. The argument given to us was that liberalization will increase production and productivity. it will reduce operations controls on businesses and private sector involvement will bring productivity, better management of assets and technology.
Nothing of this sort happened.In fact private sector has shown it is as much or even more corrupt and unproductive in indie as public sector.Barring a few well manged well meaning companies, majority are greedy,manipulators , tax avoiders and having poor quality and customer service.Profiteering has been key word
Theoretically when capacity goers up prices should come down.When competition goes up prices should go down.Why this has not happened?People should ask themselves and see who is to be blamed.
2. Salaries are a big cost component.6th Pay commission and private sector salaries have gone up by 100% to 1000% from government to private MNC sector.This is just too much and unwarranted in country like India.It has been main cause of unequal distribution of wealth in nation and cause of price rise in country.The manner in which governments have increased their running expenses reaching almost 30% of public budgets is condemnable. We should remember that governance is an expense on society and not productive.it should be minimum.But the way politicians and Bureaucracy are flying around, using imported car models and giving them,selves perks and parties is disgusting act.It must stop.There is no relation of salaries and perks and various ratios and indices in India to per capital GDP.
3. In an attempt to ape the American lifestyle and glamor Indians have gone mad after conspicuous consumption and over drive in spending money on reckless expansion of hi-fi infrastructure like malls and buildings.The property price escalation by 400-500% in 8 years has made businesses more expensive and risky.Obviously this cost has to be passed on to consumers.Do we need all this? and too fast? Why we need hi-fi malls all in 5 years period itself? Cant we have moderate growth rate? specially in luxury and show off?
If we have to ape American lifestyle we have to spend more, consume more and generate more garbage.It is just not sustainable for India like country and there is no income with common man.
A moderate growth rate that too in priority sector with target of 5-6 % growth is best suited to India for next 20 years.The madness let loose by Indian government should be rolled back.Reduce superficial consumption and luxury.Reduce expenses.
4.Though computerization as claimed to improve governance and information sharing.Not much has happened.Our judiciary is one of most rotten and corrupt system in world and non delivering and shamelessly it continues.The court premises anywhere are dens of under table transactions every day.
Corruption and rates have reached new peaks.It was supposed to happen with rising wages.A policeman with salaries and perks of 3 times now wont take same amount of tin bribe as 10 years before.
A major portion of Indian GDP ,almost 40% is sucked off from system in form of salaries wages,perks and corruption by Bureaucrats and politicians in nexus with greedy and unethical contractors including big muscle companies.This money goes in luxury spending ,real estate and goes abroad in Swiss bank accounts.
India's GDP itself is under reported as there is large scale tax evasion in real estate and general commodities. Even now.
5.break down of regulations. In name of liberalization and to help business lobbies and MNCs, government has shed regulations ( I am not talking of controls) thus leaving firld open for one and all to ,manipulate and over charge and loot consumers.The top corporate results mean mon ey is sucked from consumers or common man.We should not feel good on such corporate results.Why any business should have so high income? Either there is no competition or no regulation in country.Both are bad.How drug princes have gone up by as much as 500% in some cases since manmohan has taken over?
6. Financial markets and real state has been left open to MBCs and Foreign funds and HNIs from abroad including NRIs thus raising property prices.Same has happened in China but they have recently come down quickly to curb real estate bubble.Congress government is sleeping,In fact politicians and landlords are biggest beneficiaries of land sca running in country in last 8 years.
The reasons are more and one can go on listing.
But main point is Indian government and there so called experts should it down honestly and ponder over their bad acts in last 8 years, cool off the hysteria in economy and regulate the growth.Transparency , regulations and a fast and effective judiciary should be put in place.Consumption should be reduced.
reckless taxation by governments should be reduced back.Taxation and corruption are tow main causes of Price rise besides over consumption and hysteria created in name of Globalization. WE have ended up globalizing expenses and not incomes,WE cant do it so fats without R&D base, ill trained manpower and shortage of resources and land both.To add to this is our huge population.
If India starts consuming as much as an American ,India will simply become mountain of garbage.let us realize the truth and act.