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Wednesday, June 04, 2008

Inflation and the stupid Economist

Child Psychologists say that a man who has got 20 years of formal education, has irrevocably lost or damaged 70% of his IQ. I have completed 18 years of formal education by 10 + 2 + 4 years (and 2 years in kinder garden) so I must have lost 63% of my IQ. Hence I no qualms in saying "Main panchvi pass se tej nahin hoon" ( I am not smarter than a 5th grade kid.) Having said that, I hope the readers will appologise me for my stupidity and mistaken concepts regarding Inflation and Economy.

Though I don't have an much of an IQ, I have my basic chemistry intact and a little bit of common sense.

Basic crude oil Refining


As seen from, petrol being lighter and more volatile distills out first at about 120 C while the diesel comes out much later at 270 C. Obviously more energy is required to extract diesel from crude oil and as such it must be more costly. However in India we get Diesel at about INR 34 and Petrol at about INR 50. Diesel is subsidy, as India being an agro-based country needs diesel for tractors, tube wells etc.

If that's the case then I don't understand why the Under Performing Alliance prime-minister and the famous economist Dr. Manmohan Singh means by "subsidy cannot be given forever"

Does he mean to say that Diesel prices will be raised by about INR 15? Does he mean to say that the successive government knowingly gave the Oil companies huge losses and deliberately planned a situation where they don't have funds to buy crude oil? Does he mean to say that in last 60 years none of the oil companies ever made a profit? And ONGC being rated in Fortune 500 is a hoax?

Unfortunately, facts tell otherwise. In Pakistan, as on 16 March 2008 petrol was INR 39.64 where as Diesel was at 24.59 INR. In 2002, petrol in India was costlier by 22% and 45% compared to Pakistan and Bangladesh respectively.

Anyway, as I said I am no economist, so before starting this post I looked up to the dictionary to know what the term subsidy means. Well, Webster defines subsidy as a grant by a government to a private person or company to assist an enterprise deemed advantageous to the public.Unsatisfied with the definition I referred a second one and it defined the word more precisely as"an amount of money that the government pays to help reduce cost of product or service"

Obviously the whole and sole aim of subsidy is to reduce the cost of product, so if the world wide oil prices are increasing, the best buffer can be to reduce the taxes on the fuel. And it is a well known fact, that if taxes are remove from petrol and diesel there prices will fall in India irrespective of the current state of the world market.

It follows that our government and Dr. Manmohan Singh thinks that leaving a tax of INR 20 on an item priced at INR 100 whose production cost is at INR 1 is also a subsidy and it cannot go on forever.

To show the greatness of our economist and our budget planners, let's look at a very simple item. Milk in India costs about INR 20 while as a Soft Drinks are priced at INR 30 a litre or INR 42 per 1.5 litre. And before you jump to say that Soft drink is a Luxury while milk is a necessity, I haven't finished yet. Mineral water is at INR 10 per litre!!!

Now, does the government thinks that a drinking water is not as big necessity as that of milk? Or it simply wants to state that two litres of water are equivalent to 1 litre of milk? And don't you think that 250 ml of carbonated water ( 1.5 litre of soft drinks) should be made cheaper???

It is pretty strange that we will fight with our grocer for charging 50 paise extra, fight out in court to avoid paying a rupee extra over MRP but never ever utter a single word when the government makes us pay through our nose in name of inflation. Like I said, we all have had formal education and has lost our IQ somewhere during our education.

So, what's wrong if we pay more? We are making our country developed, Right? No wrong again!!! Let's see how we spend the money! 5-year plan is turned into a 50-year plan of corruption. So our Under Performing Alliance (UPA) government takes pride in the sucess of the "Pradhan Mantri Gram Sadak Yojna". It is simply a waste of money. It's an insult to labour and mockery of intelligence.

What kind of road do they build? Is it a pitched road? a concrete road?NO. It is a road that is made of clay. Motorable during summers and with monsoon it disintegrates, and the next summer the process is repeated again. Why can't they sanction a pitch road?

I guess, our Prime minister has done a PhD.and thus has more than 20 years of formal education and has lost more than 70% of his IQ. He is incompetent to make his own decisions and thus needs guidance in everything he does. And the God Sent guidance in form of Under Performer's Alliance chairperson Ms. Sonia Gandhi!!!

3 comments:

Intriguiging Answers said...

The article has turned out to be quite informative becoz of tyhe research that has gone behind it.....Even for me the inflation under a such prime minister(an ecomomist) is a dissappoinment.....Mya be they have invested too much in increAsing the number oF seats to accUmodate the OBCS.

Nanhe said...

The best way to reduce the cost of petrol is to ensure that a person can not have more than the particular limit upto which a person can buy petroleum products in a month or year. But then this may lead to further red tapism, corruption etc.
So the best way to combat rising world prices is to increase the prices so much that it becomes difficult for people to buy them.
If u ask Arjun Singh for the solution then he might suggest some reservations for the same....[:)]

falcon said...

@kg
Thx for the appreciation... well I did a litle research b4 i wrote this post but nothing compared to what others do...like rishabh, Man of roma, Poonam , Mitesh and others...

@nanhe...

Dude.. this is the worst comment u hav ever done on any post o9n any blog site...
Arjun singh styatementy is downright sarcasatic..But I seriously seem to doubt how u passed ur IEM. Incresing sot of petrol/diesel would mena increased cost o f transportation ... hence even items of daily need like groceries, and other staple food is to rise . Not to mention the increase of cost of production of food items... due to the use of diesel in tractors, threshers and harvestors, tube wells.. .

The worst suffers of which will be lower middle class and BPL people...