HOW DOES THE ECONOMY WORK

 HOW DOES THE ECONOMY WORK

This is one of the most stupid topics that I may have ever started an article with. So many books have been written in economics and upon economics just to define what it is and yet nobody seems to have completed the job so how can I with my limited vision ever hope to make a dent on such a huge mountain which moves the world and moves the household.
All of you must have certainly heard about the story of the great depression in US in which there was a village which effectively had come to stand still and there was no economic activity going on.
However ,The story goes that gentleman visits this village and goes to the only hotel or an inn to book a room. He puts down the 100 dollar bill for two nights and books a room saying that he will return in the evening. Hotel owner at the reception says that if he does not stay he will have to pay 25% for his booking to which the visitor agrees and goes out  of the hotel.  Promptly the hotel owner rushes with his hundred dollar bill to pay the bartender next door who used to give the supplies to the hotel. Upon receiving the money after long time the bar owner rushes to the grocery store next door and pays off his debt. The grocery owner further pays the butcher and the butcher pays the village p********* or let's call the village service lady. The service lady goes back to pay the hotel owner where she had visited her clients
So within a matter of hours everyone's debt is paid off and the money is back with the hotel owner. The visitor comes in the evening and cancels his booking and walks off with $75 in his pocket.

I am sure it must have been something like what you saw in the past one and half year when not only the national but international economies had come to a standstill. So if you are young and observant  you must have  noticed the whole country  shut down overnight and not gradually like the great depression which none of us ever saw.

You have seen how starting from the lowest common denominator of the society in form of the cobbler ,chaiwallah, sabjiwala and upwards to the luxury hotels everyone lost earning source overnight.

This was a great time to observe how how each of these people contribute to our sustenance. It was a great time also to observe the movement of economy , there has been never been a time at least in the past hundred years ever since the Spanish flu when even a school boy could observe how how we all in the society are interlinked.

The idea of writing this article is to appreciate and underline the importance of sweeper , plumber, electrician, housemaid, grocer, cobbler, shoemaker shoe company, advertising company for the shoe company, the retail outlet for the shoe and the employees working in that outlet and everyone in the chain in between...
You can replace the shoe with the FMCG products, the processed food products, the clothes, the medicines, the multiplexes or anything that you like.
If any of them in the chain breaks down the product will not be reaching us and in terms of economics will not be considered to have been produced because it has not reached the consumer.

It is one thing to feel proud by changing your tap at home because maybe we have the skill by virtue of our profession... But does a cardio surgeon operate himself for heart problems or even gallbladder or cataract. It is imperative that we take help of all the professions existing in the society to make a life easier and because every penny that we spend helps to move the economy.

Prior to 1991 some economic reforms were already in the pipeline. The income tax rates had come down to 50% from the earlier 90%. But from '91 money became transparent and opportunities were given to bring the hoarded money into the open. Profit stopped being the dirty word. As a result the traditional Seth ji who used to keep his cash in the thick Steel lockers brought it into the open and started using it.
Those of my age or older will remember how many brands of chocolate we had in India then or how many types of sweets were available at the local sweet shop and how the Chetak scooter could be obtained only on foreign exchange with the waiting list of 2 years and how BSNL used to give a telephone after two years with OYT booking of rupees 10,000 in the 80's. For sanctioning two bags of cement one had to take the permission from the DSO.

Why was all this?

Because in public life there was no flow of money.

The government had mandated how much everyone could produce and what they could produce. Firstly the salaries were low so people could not afford even necessities of life and secondly their weren't sufficient things to buy.
But once the Seth ji like our typical visitor to the village pumping the fabled $100 into the economy the economy started moving. The black money which was hoarded in the vaults without any idea as to how to spend it came into the market to create demand and the product both.
Liberalization of economy and digitalization and computerization and the  media opening up to new vistas created an unprecedented scenario when majority of the population could be employed or be self employed.
With time we saw so many  financial products where an average person earning 10000 rupees could not only save but grow his money appreciably.
All these financial products may not have been good for the financial health of the investor but none the same they existed. In an Open market it is only the consumer himself who decides the product that he wants and this may be a television, a car, insurance policy or a Mutual fund.
But we must remember that apart, from investing money for ourselves it is also our duty to take the services of the people connected in those fields.
You may be good at the income tax laws but if you think you can do the job of a CA then there is something wrong with your perception because he spends equal amount of effort attaining professional excellence as a doctor.
Similar is the case of mutual fund distributor or even a insurance advisor.

We may not believe the glib talk of the showroom salesman to buy a 20 lakh car without doing own research but we do not spend even half the time at evaluating a financial product the person selling it to us. Example of this lies in the fact that we renew the  insurance of our expensive car every year but most of us may not be having coverage of our lives equal to even that of our car unless we have purchased the term insurance.

India is not a manufacturing centric Nation and most of its development has come about by virtue of the services that it offers nationally and internationally.
In that direction it is important that at every point of your life you utilize the services of professionals and pay for it because I can promise you that a good professional even if he is your next door cobbler can help you save lot of money , time and energy.

As much as you should evaluate a product also evaluate the service of the person offering it to you and the person himself. By virtue of paying his service charge you have earned the right to question his service but not without it.

There are lot of unscrupulous and also incompetent professionals out there but it should not take too much time to see through him and take your business elsewhere.
We should content and restrict our selves with the profession that we have taken and keep reskilling ourselves in that direction to greater heights both onboard or on shore should we decide to pursue a career there.

So help you God.

P.S. this article has been written in the visitors lounge while I am getting my vehicle serviced. Not only will I opt for the optional service but will tip the staff who comes in contact here with me.
This goes hand in hand with my policy for another old car where which is serviced by my friendly car garage mechanic.
So I endeavor to support both ends of the society while benefitting myself with peace of mind.