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 have 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 spare me for my stupidity and mistaken concepts regarding Inflation and Economy.

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

Basic crude oil Refining

As seen from the image, 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 subsidised, as India being an agro-based country needs diesel for tractors, tube wells etc.

If that’s the case then I don’t understand what 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.

Anyways, 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 removed from petrol and diesel their 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 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!!!

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