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Posted On Friday, Jul 05, 2013
India, according to data from the IMF for 2012, is the tenth largest economy in the world according to nominal GDP. Placing us higher than developed economies like Canada and Australia and if India maintains its growth trajectory (or brings in its black money) then closing in on the UK, Italy and Brazil. However, according to the Paris based OECD (Organization for Economic Cooperation and Development), India has probably become the third largest economy in the world, (as reported by Economic Times on 30th May, 2013) surpassing the money printing, currency devaluing Japan and we are halfway through 2013!
The third largest economy in world? Makes us swell up with pride doesn’t it? Invokes visions of high rises, huge malls and swanky cars, basically world class infrastructure facilities. Is this a reality? Yes, but only to a certain extent.
According to data from the World Bank, the so called ‘third largest economy in the world’ has 72% of its people living in rural India and is STILL heavily dependent upon the monsoon to irrigate crops, not irrigation, not dams, not huge rain water harvesting projects, but the monsoons. So India’s prosperity is definitely married to the onset of the monsoon season. If the monsoons are adequate all is well with the marriage, but come a year where the monsoons are poor, we have drought like issues in Maharashtra and other parts of India, water cuts, power cuts… the marriage gets rocky.
According to ‘Trading Economics’, a New York based economic research firm, only 34% of India’s agricultural land is irrigated, which means 66% of agriculturists still make a beeline for the nearest temple to Indra (the God of Rain) around the first week of June.
If their prayers are unanswered, or the answered in abundance, then the crop of 66% of the land is under threat due to very less water, or too much of it. This means the following:
1. Reduced crop output –
If the land is dry or submerged in water crops cannot grow and flourish thereby resulting in the waste of effort of the sowing the crop, not to mention the costs incurred on seeds, fertilizers and other requirements.
2.Increased Prices of commodities –
Economics 1.01; if demand is relatively static and supply goes down, prices skyrocket. Apply this to point 1 and you will soon hear your friendly neighborhood train traveler complaining about the rising prices of essentials and how the rulers show complete apathy to the woes of the electorate.
3.Overall rise in inflation –
Rising commodity prices will start affecting the rest of the economy and put even further pressure on an economy groaning under a CPI (Consumer Price Index) Inflation of 9.3%.
4.Less Savings less consumption –
With the common man paying more for the essentials, he has less money at his disposal to save or to consume more and improve his lifestyle.
5.Weaker economy –
High prices, low rates of saving, reducing consumption, all of these lead to an economic slowdown leading to the crouching tiger remaining crouched and shackled; not leaping to touch new highs of growth.
As stated earlier lesser savings mean lesser investments. In a country, which has no social security programme to speak of, it is our investments, made prudently, which will stand us in good stead once we retire. Hence, it becomes imperative that we invest in the right vehicle at the right time, which will enable us to come that much closer to our financial goals, irrespective of weather or economic conditions.
They say ‘behind every successful man is a woman’ similarly behind India’s economic growth, like the ever moody spouse stands the monsoons. The entire cycle of the Indian economy striding forward or limping forward largely depends upon the monsoon. India needs to plan its water requirements and allocate resources to harvest rainwater from the abundant areas and ship it to places starved for rain. Water storage facilities also need to be created and maintained. India has a coastline of 7,500 kms, desalination plants along the coast will also help.
Like India takes measures to reduce its dependency on the monsoons, we too must reduce our dependency on market tips, and khabar and invest wisely to ensure that we can sit post retirement in that comfortable armchair without any financial worries with a steaming mug of tea and enjoy the monsoons.
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The views expressed here in this article constitute only the opinions and do not constitute any guidelines and recommendation on any course of action to be followed by the reader. The views are meant for general reading purpose only and are not meant to serve as a professional guide / investment advice / intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or mutual fund units for the readers. Whilst no action has been solicited based upon the information provided herein, due care has been taken to ensure that the facts are accurate and opinions given fair and reasonable. Recipients of this information should rely on information/data arising out of their own investigations.
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