World as I Think

The previous two posts have kindled me and I have more queries and answers for myself. I had a interesting comment by Deepak who had completely agreed that the growth/income distribution was definitely lopsided but suggested that the benefits of this have however started to trickle down albeit slowly. He had remarked that we should not forget that the so called higher income people who are earning higher income for the nation as a whole and contributing their best possible. I would certainly accept it, I can see it everywhere, the construction industry, hospitality industry, the security guards so on and so forth.

The IT/ITES sector currently contributes about 3.6% to the GDP and currently employs about 2 million people (India's population is 1100 mn).The recent CRISIL Survey done on behalf Nasscom suggests that for every job created in the sector, four are created in the rest of the economy. Several of these jobs are created among the less educated workforce. It effectively translates to about 8 million jobs created by IT. It is a good picture isn’t? It has done what it could do best.

Let me plug in some figures which shows the growth rate of various sector of the economy



I tried to crunch the growth rates of different sectors. The growth rates from the period 1990-2007 are 2.85%, 6.71% and 8.41 % for agriculture, industry and services respectively.
We are becoming a services driven economy and it shows up in the following table which paints the contribution of different sectors to the economy


The following observation tells the story, about 60% of the people have grown at 2.85% and about 20% of the people have grown at 8.50%.

This is not the end of the story; real growth of the income is much skewed. The Consumer Price Index (CPI) has increased by about 7.93% for agricultural labors and has increased by about 7.5% for industrial workers for the period 1990-2006.

The essentially means that 600mn people have de-grown by 5% and about 200mn people have grown by 1% in effective. Let me probe a little more, about 2mn (0.18%) people contribute to 3.6% of the GDP and the per capita contribution is too much. (That’s why I shout that these people have too much of money compared to rest of the population).When the per capita income is high they have enough money to spike the demand and contribute the best to the inflation.

I have no two views that we should grow as an economy but we can leave about 60% of the people behind us. All I want is the means to improve the life of rest of India.

The FM did something of the aam aadmi stuff this time and you know what Pranab Roy said during an interview with the FM, he freaked out saying that the markets would go down if this was the reformist attitude FM had to paint to the corporate world. Mr. Pranab “Why don’t you understand that the investors are a bunch of 50mn people whereas there are also other people in India as well”.

I certainly believe that Capitalism is the way out to bring about economic prosperity to the society. I don’t believe in skewed capitalism and it is the duty of the government to take everybody together.

I don’t want a future where we would have reservations for the farmers and downtrodden for the mistakes we commit now!!!

Labels: economics