India's 100 richest are 25 pc of the GDP: Forbes

http://ibnlive.in.com/news/indias-100-richest-are-25-pc-of-the-gdp-forbes/105548-7.html?from=tn?from=rssfeed#

The Billionaires Club of India almost doubled from last year to 54 members up from 27, aided by a rebounding stock market that gained two-thirds in the past year and an economy growing at six per cent.

According to Forbes Asia magazine, the country's 100 richest people have a combined net worth of $276 billion, which was almost a quarter of the country's GDP.

Last year, there were only 27 billionaires on the India Rich List. This year, the number has almost doubled to 52-two short of what India had at the peak of the stock market boom in 2007.

Highly Employed Poor Peoples

Note: Taken information from wikipedia...

With the recent economic slowdown some of the new's that keeps coming often is how lots of peoples are loosing their jobs and unemployment rates are in the rise. I was curious to know the unemployment situation of the world and did a small search. I came out with the following chart which is a compilation of the world unemployment rate from CIA figures.

World rate of unemployment

Now I was surprised to see that India is comparable to most of the developed nations in terms of employment. Even surprising was we were better then the United States. We have an unemployment rate of ~ 7.5% as compared to 10.2% in the USA. Well that's like doing really good. But the hard fact is we are still a long way to go to provide proper employment, and also proper healthcare and food. I was now more interested to know how do we fare in poverty. So I went ahead and checked the poverty statistics. The first chart I checked was that of people below the poverty line as defined by the respective countries. Now we start showing up being not so good. We are just better then the African nations and comparable to the developed nations. The developed nations fared really well in uplifting their peoples above the poverty line. China surprisingly did a really good job, partly because their poverty line must be really on the lower side.

% population below national poverty line

A better way to compare countries is to put them in the same scale. So when I looked into such data I found one which gives the % of population living below $1.25/day. And the statistics revealed the status of our population. 40 - 60% of our population falls in that category. Our neighbors line China, Pakistan, Sri Lanka and developing nations like Brazil did much better with 6-20% of their population being in that category. There is a lesson to learn, we India has a long way to go. Though comparing at a single level of currency is not a proper way to look at things and we need to look into purchasing power parity, this still gives us an indication that we are a "Highly Employed Poor Nation"

% population living below $1.25/day

India Corruption Study 2007, an eye opener...

This is the third, in a series of surveys which Transparency International India (TII) has done to measure the extent of petty corruption. The niche about this study was its focus on below poverty line (BPL) households.

The scope of the study is not only limited to perceptions about corruption in general, but perception in specific context of a service and, more importantly, actual experience of paying bribe by BPL households in availing one or more of the 11 selected public services. Depending on frequency of interaction, the eleven services are divided broadly into “basic services” (PDS, Hospital Service, School Education (up to 12th), Electricity Service and Water Supply Service) and “need based services” (Land Records / Registration, Housing Service, Forest, NREGS, Banking Service and Police Service (traffic and crime)). The study does not include operational irregularities in the system and even corruption that does not involve citizens directly.
Estimation of bribe: The total bribe amount involved in a year in BPL households availing the eleven services covered in this study is estimated as Rs. 8,830 million.

Services ranked: School education is least corrupt service. Police stood number one corroborates the general impression. The Land Records / Registration and House/Plot, which are specially tailored for BPL households, stand at two and three in the rank is a matter of concern.

THIS NEXT ONE WILL BE INTERESTING...

Relative position of states on Corruption: No state is anywhere near "zero corruption" level. States are grouped into four levels to explain the extent/level of corruption based on a weightage scheme – Moderate, High, Very High and Alarming.


First thing I noticed was Assam, the state I belong to, is at the top of the list in terms of corruption. It feels bad, but this can be seen as an opportunity by the state government to improve their processes and governance focussed on the BPL households. Himachal has done good (being moderate) in all the 11 services. One common thing that I can see from it is, in general the states which are doing good economically also have lower level of corruption. Something that is not surprising. I hope the state governments take this report seriously and don't just throw it as a junk report.

Other highlights can be found at the report at the following location:
http://www.cmsindia.org/cms/highlights.pdf

Is the fuel price hike justified? What is the real fuel price?

On 4^th of June 08, the Indian government declared an increase in petrol (Rs. 5/litre) and diesel (Rs. 3/litre) prices because of the mounting losses of the oil companies. The global crude oil prices have been hovering at ~ 130 $/barrel for quite some time now and the oil companies were loosing money in crores on a daily basis. The Indian prime minister even came out to the address the nation saying that this the minimal hike that was possible looking at the current scenario.

This made me to wonder, what is the real price of fuel? Who makes all the money and who carries the losses.

I started doing some basic calculations and started hunting for data in the web. Well, first let do a straightforward calculation, what is the crude oil price (in INR)? Taking a recent crude oil price of $130/barrel and using a conversion rate of Rs.40/USD, the crude oil price becomes ~ Rs.32.71/litre. Petroleum price after the current price rise will be Rs.55/litre (average nationwide). So we are talking about a petrol price which is ~170% of the crude oil price. So somebody must be making money (and not lossi), as it’s hard to believe that refining cost would be that high. I do not have any refining cost data, so the next step would be to hunt for that information. (What’s still in back of my mind is, oil companies are making losses in crores)

I came across a gasoline price breakdown report from “California Energy Commission” website (http://www.energy.ca.gov/gasoline/margins/index.html). They showed the split of all the costs starting from crude oil price to retail price, separately showing the refining cost and also taxes charged by the federal and the state governments. I believe the cost breakdown structure will be similar in India, excluding the tax structure. Looking at the May month’s data, the refinery cost along with the profits accounts for 7.5% of the crude oil price.

Taking this scenario in India, where the retail price is 170% of the crude oil price, and refining expense (with profits) is only 7.5%. The rest of the amount must go away in taxes and other components, which is retained by the central and state governments in India. As a layman what I understand is governments do not want to loose their own share of the money, and they are trying to nail down the oil companies out of their profits, and finally they transferred part of the financial burden to the consumers.

The government should not risk loosing the stream of their revenues, as this might affect the other developmental activities as well as the fiscal deficit might climb up. But looking at the developed economy like the United States, their retail price is ~ 135% of the crude price. Thus the US consumers are paying less then what we pay in India, even after subsidies? Something hard for me to comprehend… May be I needed to go back and check my economics.

Here are excerpts from what the petroleum minister told the Rajya Sabha (pretty old data, 2005) which gives some insight:

http://www.moneycontrol.com/mccode/news/article/news_article.php?autono=193793

“Giving a break-up in the Rajya Sabha on Tuesday, the Petroleum Minister said the cost of production of petrol was only Rs 19.58 per litre, whereas the Customs duty, excise duty and sales tax take the retail price to Rs 43.49 a litre (in Delhi). The tax component is almost 55%.

For diesel, the tax component in the retail price is almost 34%, with customs duty of 6% (Rs 1.81), excise duty of 17% (Rs 5.07) and sales tax of 11 per cent (Rs 3.39). This takes the retail price to Rs 30.45 a litre in Delhi, while the basic cost of production of diesel is only Rs 20.18 a litre. As for cooking gas, while the production cost of one cylinder of LPG is Rs 261.97, local sales tax of Rs 32.75 takes the selling price to Rs 294.75. For kerosene, the per-litre cost is Rs 8.70, while the selling price is Rs 9.05.”

Who feel's the Inflation?

There are talks of Inflation everywhere in India now (or should I say everywhere in the globe). Prices of food grains have skyrocketed, and oil prices keeps rising every other day. But how much are we each Indians affected by inflation?

The impact of inflation depends on the % of your income spent on food and essential items. This is the kind of expenses you cannot avoid, and qualifies as something we call a basic necessity of life. If this is very small percentage of ones monthly income, people do not really care about it. Inflation hit’s the poorest section of the society the hardest, as most of his/her daily income goes in fulfilling their basic necessities. Even a small increase in the food price makes these basic necessity less accessible to them, and with the current trends, the poor might have been choking!!

I wonder will any one of the richer sections of the society keep track of the prices of food grains. The price of sunflower oil has crossed Rs. 100/Litre. Rice is not available below Rs. 20/-, vegetable prices increasing beyond what someone might call logical. But I guess nobody cares until it starts hitting his or her pockets hard.

To give a personal example, I really won’t care if matchboxes start costing rs.2 in place of 1, even though the price has doubled. I won’t think twice before buying it. This can be similar to vegetables/rice or other commodities for someone else. So everyone has to ask for himself, do I feel the inflation?

Inflationary effect becomes severe when there exists a huge difference in affordability within the consumers. As for food grains, everyone in the world is a consumer. Nobody would disagree that western world has very high purchasing power as compared to the African nations. So, I believe the western nations are least affected by the rising food prices (as compared to their African counterparts). This holds true for ultra rich and the poor in India too. The section of the society who can afford it all sucks up most of the essential resources, at any cost.

Inflation has culprits in the supply side too, and also an increasing affordability of a vast population of the developing nation. But nobody can deny the fact that inflation does not affect all sections of the society equally. It hits hard the section of the society who can’t afford to compete for the same “limited” resources with the ones who can afford much more...

So step back and ask to yourself, are you affected by the Inflation? Are you choking for your basic necessity?

The best we can do is use these resources in a more sensible way, & don’t waste…