Analysis of Indian news dated 11-Jul-2012
July 11, 2012
Prices of many food products are rising.
Indian Home Minister, Mr. Chidambaram, says that the middle class is ready to pay for mineral water and ice cream but can’t bear an increase of Re 1 in price of wheat and rice. He is right about the fact, but wrong about the reason.
The price of mineral water and ice cream is determined by free market. The price rises and falls with demand and supply constraints. The price of wheat and rice is being determined by government. Once the price rises, it never falls.
Chidambaram is welcome to remove governments role from agriculture. Let the prices rise and fall in free market. Then, the middle class will not blame the government.
Chidamabaram wants to control the price of Wheat and rice, but he does not want people to protest. He wants his cake and eat it too.
“Government is good at one thing: It knows how to break your legs, hand you a crutch, and say, ‘See, if it weren’t for the government, you wouldn’t be able to walk.’” — Harry Browne
New real-estate launches have doubled from 1,700 in Jan-Mar quarter to 3,600 in Apr-Jun quarter. This is when the current unsold flats will take 2 years to sell. If we are not able to sell current flats, why are we building new flats?
The answer is government policies. Government marks real estate as priority sector. Loans under this category are subsidized. Government constantly gives more and more tax concession on real estate purchases. The government is blowing the real estate bubble bigger and bigger for the benefit of real estate companies. The cost is being borne by home buyers and tax payers.
Prime sectors of Noida are sold off at throwaway prices without any bidding process by previous BSP government.
In India almost all bureaucrats get post-retirement position. They use their power and contacts to ensure a post for themselves even after retirement e.g. 10 of 11 officers, who served as secretaries (Personnel) since 1998, got a position at retirement.
India taxes fuel heavily and then subsidies it. Same for food. States tax food, while center subsidies it. Why? The more the rules, the more the bribes.
Buy physical gold and silver to protect yourself. If you cannot touch it, you don’t own it. Exit all paper investments including ETFs, stocks, PF, PPF, NSC, etc.
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