The Internal Control-Widening Current Account Deficit
Posted in Finance Articles, Total Reads: 1338
, Published on 07 July 2013
Come on my son, wake up. How long will you sleep? Get up I say. Its time. CAD is widening. This is the way a new-gen mom should wake up her son in the upcoming days. Yes, the article deals with the burning issue.
India is basically a consumption based economy. With population touching new heights every second, we have an extraordinary inbound demand. We can survive even if we did not get foreign buyers. The hardest truth is that we can only survive. We will never grow.
With CAD widening every quarter(CRISIL sees FY14 current account deficit at 4.5% of GDP), it’s the responsibility of every citizen to spend a small chunk of their time on this burning issue. Citizenship obligations are not over the minute we are dark-inked on our index finger, Its a continuous process. It’s a collective responsibility.
Trade components first:
The growth of this mighty nation has been primarily driven by Oil of which only one-third is the indigenous quantity. Despite the increasing cost of imports and the commodity itself, It becomes a Need. A Necessity.
The next major component is Gold. India and China together account for more than half of global gold consumption. Indians, Despite their economic position, are more inclined towards purchase of the if-you-have-it-loads-its-your-pride metal .The passion towards the possession is mainly driven by custom, marriage, safety concerns, tradability, and as a hedge against the rupee.
Miscellaneous imports includes capital goods, transport goods and electrical and electronic goods fuel the infrastructure domain of the nation. Indigenization is the key in reducing imports, but in most of the areas like Power, Telecom, Engineering etc., imports are a must to keep the costs.
Thus, Containing CAD by controlling imports is therefore not a feasible option. Dependency on short-term capital flows to cater dollar needs pushes India’s economic position at stake.
Yes, the solution could be in the lines of “India could concentrate on still-to-be explored areas of exports such as manufactured goods, auto products and to look for New trade destinations and the amendments to Trade policy, FDI across all sectors” and the list goes on attributing the factors where the locus of control in well beyond the an individual’s limit.
SO WHAT IS OUR SHARE IN REDUCNG THE CAD?
India has around 3700 approved Bschools out of which lakhs of Managers are coming out every year getting fat packages and and out of which a thousand get settled down abroad. Even they contribute through remittances (Unconsciously). What are we doing here by staying here?
There is a latent, Inbound demand for the solution to the burning issue prevailing in India. Following are the things which I feel could add some starch to the solution.
1. Indians dependency on gold should change. How is it possible? The bridegroom should get convinced with cash and land if you are so stubborn in getting a dowry. Gold should be treated as an ornament and as an ornament only. We should not get carried away by the so called customs and tradition. Come on. We are compromising our tradition for all other means. Why not for this much needed thing? These kinds of psychological changes take time to effect but I bet we are already late.
2. Switch off the power. Your laptop is already over charging!!
Nearly 60% of India’s electricity comes from Coal of which only a part is indigenous fraction. This leads to heavy chunk of coal imports every year making the debit side of Balance of payments, heavy. The point is not to stay in the dark by switching off all the lights but please do care for the dark (areas).Every household, If they are perseverant enough, can control usage of the electricity.
3. Recently I came across an excellent article about a Water Conservation Project, Thanks to Facebook.
“Aabid Surti, a 77-year-old celebrates Sunday like none else, picking a building in Mumbai’s far-flung suburb Mira Road and, with his plumber and a volunteer in tow, searching it for leaking taps to plug. Free of charge. His reward? “A lot of water saved. And sometimes, an offer for lunch,” he says simply. Surti’s non-governmental organisation, Drop Dead, has just one employee – him.
Such responsibility should come from every corner of the nation and lot of Surtis are needed to make this nation survive a little longer.
Looking for any incentive to do all this?? Its Deferred Revenue Savings, It will fetch your future generations a life, A Living. You can sleep with a sense of satisfaction that you have saved something for your grandson to enjoy.
The Problem with the present generation is that “I pay I use” mentality. Please keep in mind that if this is the state for quite a period of time, Then there will be lot of money but hardly any grains. We talk about internal control systems these days and the saddest part is that we had failed to follow the plain English meaning of it.
Hence every citizen should act with a sense of self control in enjoying the resources of the nation. This point had been excellently portrayed in a tamil movie “Unnal Mudiyum thambi”(You can, Brother) directed by Veteran K.Balachander. Its payback time to give something to our very own soil.
Boss!! I just woke up. Had you?
The article has been authored by Prabhu M, BIM,Trichy
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