well it has not been the greatest of months for the Indian ecoomy to say the least.
the rupee has devalued significantly in the last 2 months and our CAD(current account deficit)is 4.8% of the GDP.
well i am no economist by any stretch of imagination but it does not take Someone with Einstein's IQ to understand what is going wrong with the economy!!!
Current account of a country includes all inflows and outflows of routine nature.
inflows or Credits include exports of goods and services and remittances recieved from abroad.now a majority of these remittances are from relatives of indians who live abroad but also from medical tourism!!
since january 2013 the Govt.Of india banned singles and unmarried couples from having babies through surrogacy,this has stopped one vital chunk of remittances that were coming from abroad as patients make their payments through their respective banks in their respective countries to clinics in India.this is essentially FOreign currency and in a majority of the cased US$.
this move has also stopped a sizeable number of tourists from coming to india as patients who come for Surrogacy/IVF also go sight seeing across India.this contributes to the economy by helping the Hotel industry, some patients stay a strectch of anywhere between 30 to 90 days in INDIA whilst they wait for their respective countries to provide travel documents for their newborns.
it helps the Airline Industry,the Auto Industry.it helps provide odd jobs to people.even though we might not be talking huge numbers it has restricted inflows which were only going to grow further because surrogacy and Assisted reproduction was growing at a remarkable pace in India.
conversely imports,outward remittances,Indians travelling abroad contribute to the outflow or Debit.when outflows exceed inflows you have a current account deficit.
when the CAD is not able to be covered by the surplus capital a country has to remove money from its FOREX reserves therefore leading to further detorioration of the rupee against the us$.
so why is CAD so important-it is a measure of how dependent an economy is on foreign inflows to meet its current demands,obviously if this need is high it indicates a problem.CAD is measured in proportion to the GDP(Gross Domestic product of a country).presently this is at 4.8% to India's GDP and increse from 1.3% from 5 years back.so the bottomline is That India's demand for foreign currency has increased manifold in the past few years but the supply has not kept pace!!
now the Econmy being in poor shape and financial wizards like PM Singh,FM Chidambaram and RBI governor need to read the story below especially because they wish to pass the food Security Bill which will Provide free food to 67 crore of India's population.the idea is great on paper and i fully endorse it but where will the money come from?the present Govt. is not bothered about this,they just want to pass the bill so that it increases their chance of coming to power again in the parliamentary elections to be held next year.
"There was a chemistry
professor in a large college that had some exchange students in the
class.
One day while the
class was in the lab, the professor noticed one young man, an exchange student,
who kept rubbing his back and stretching as if his back hurt. The professor
asked the young man what was the matter. The student told him he had a bullet
lodged in his back. He had been shot while fighting communists in his native
country who were trying to overthrow his country's government and install a new
communist regime.
In the midst of his
story, he looked at the professor and asked a strange question. He asked:
"Do you know how to catch wild pigs?" The professor thought it was a
joke and asked for the punch line. The young man said that it was no joke.
"You catch wild pigs by finding a suitable place in the woods and
putting corn on the ground. The pigs find it and begin to come every day to eat
the free corn.
"When they are used to coming every day, you put a fence down one side of
the place where they are used to coming. When they get used to the fence, they
begin to eat the corn again and you put up another side of the fence.
"They get used to that and start to eat again. You continue until you have
all four sides of the fence up with a gate in the last side.
"The pigs, which are used to the free corn, start to come through the gate
to eat that free corn again. You then slam the gate on them and catch the whole
herd. Suddenly the wild pigs have lost their freedom. They run around and
around inside the fence, but they are caught. Soon they go back to eating the
free corn. They are so used to it that they have forgotten how to forage in the
woods for themselves, so they accept their captivity."
The young man then
told the professor that is exactly what he sees happening in India.
The government keeps
pushing us towards Communism/Socialism and keeps spreading the free corn out in
the form of programs such as supplemental income, tax credit for unearned
income, tax exemptions, tobacco subsidies, dairy subsidies, payments not to
plant crops (CRP), welfare, medicine, drugs, etc. while we continually lose our
freedoms, just a little at a time.
One should always
remember two truths: "There is no such thing as a free lunch, and
you can never hire someone to provide a service for you cheaper than you can do
it yourself. "
"In India the problems we face today are there because the
people who work for a living are now outnumbered by those who vote for a
living."
--Anonymous
