Sunday, February 02, 2014

You cannot control fire with petrol.

Seems that Indians are unable to save as much as before as they are having to pay ever increasing costs to maintain their standard of living. The reasons are purely due to actions by our government. School fees have risen by a mind-numbing 433% between 2004 and 2013. Why? Because the Congress has increased salaries of teachers in government schools, who are not properly trained and do not come to work half the days, by over 80%. To get their votes. Naturally salaries of teachers in private schools have risen, although by not as much. Then the Congress passed the Right to Education Bill which forces private schools to reserve 25% of seats for students from poor families for which the government pays token amounts to each school. To raise money for the handouts taxes have been increased by equivalent amounts, raising costs still further and forcing consumers to reduce consumption. The other way the government has been financing its wasteful spending is by forcing public sector companies to increase dividend payouts instead of spending on new projects which will increase employment. The MNREGA scheme which hands out packets of cash to the rural poor, for doing nothing, is linked to inflation. It started by paying out Rs 69 per day for 100 days in a year but last year Haryana was paying Rs 214 per day and is probably paying even more this year. Since this puts an ever rising lower level on wages for rural labor farmers have been increasing prices for their produce to make profits. The Congress has introduced a Right to Food Act which seeks to provide rice at Rs 3 a kilo and wheat at Rs 2 a kilo to 800 million poor people. To do this the government offers a Minimum Support Price to farmers for producing cereals. This underpins the market price at a higher level and encourages farmers to demand even higher prices at the next harvest. High cereal prices lead to higher prices for milk, eggs and meat as the price of fodder rises in conjunction. Couple of months back sugar mills in UP were refusing to buy cane at the price set by the government because the international price of sugar was so low that they would make losses. Farmers are encouraged to divert land to the production of cereals so costs of vegetables soar. The government then hoards cereals to distribute it just before elections, leading to rotting of vast quantities. When inflation is stoked by the government it cannot be controlled.

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