A Few Good Things

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A Few Good Things

Tag: Inflation in India

POPFLATION – Sky High Inflation due to Population, Lifestyle & Migration

A few events in the last few weeks triggered me to write this Blog.

1. I have stopped buying vegetables and Grocery since my dad came to stay with us 18 months back. Last week I happened to step out to buy veggies on a Sat. I packed my two bags with the usual items for a week and gave the vendor Rs 300 ( 18 months back the cost for this would have been about 275 – 280 Rs) – he started at me and said the total cost was Rs 550 – thats almost a 100% increase in 18 months.

2. After the Veggies I went to buy Rice. I clearly recollect buying good quality Sona Masuri rice for Rs 36/- Kg 18 months back. Thats now Rs 56/- . Thats a 75% increase.

3. This Sun I visited my aunt after her Cataract operation. I enquired about the cost – Rs 78,000 for two eyes. In 1980 my Grandmother had got it done for Rs 2000, in 2005 my dad got it done for Rs 25,000 and 5 years back my mother had her Cataract done for Rs 50,000. Inflation for Cataract operation is more than 25% YoY.

4. 3 Years back we had agreed on withdrawing a certain amount of  cash every month for Maid salary , Misc expenses etc. Last six months I have observed that by the 15th we are running out of cash and withdrawing again. We went back to the drawing board and found that our monthly expenses have more than doubled in the last 3 years.

Don’t believe the Government when they say that Inflation is 8%. Its not. The only items that have got cheaper in the last 25 years have been PC’s ( In 1992 a PC AT, 1MB,  40 MB with a B&W Monitor was 40K , Today you can get a dual core High End Laptop 50X more powerful for the same price)

Why is this happening – its more than the UPA Government messing up for the last 10 Years. Lets look at some data.

Guess the human population in 1800? Just 1Bn. From AD 1 to AD 1800 it rose slowly and steadily from 100M to 1 Bn – in 1800 years. By 1930 – in the next 130 years it doubled to 2Bn, and in 30 years from there it became 3Bn – since then we have been adding a Bn people on earth every 10 – 12 years. Thats colossal and scary.  The question to be answered is what triggered this growth from the mid 1800’s ?

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One trend I spotted was the plethora of inventions that happened between 1850 & 1900. Those 50 years specifically and the 19th Century could well go down in History as the era with the most revolutionary inventions. The Steam Engine , Electricity , Pasteurisation, Telephone , Plastic , Safety Match , Dynamite, Motor Vechile (For the full list see Annexure 1 at the end of the blog). These inventions got the Industrial Revolution started , quality of life improved , diseases were eradicated , food shortages became history and mankind has since then never looked back as humanity moved from survival – necessity – comfort – luxury. Finally the hand combat wars were over as we moved to Smart Wars that could decimate cities, but by and large civilian population was safe from the marauding enemies.

We see this trend even in India. In 1850 our population was less than 250M , during Independence we were almost 330M and 50 years later we are still growing at 1.2 B threatening to overtake China in the next 20 years.

 

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More people , more needs, more food – its a simple demand supply equation. As countries progress and per Capita income grows your nutrition basket has a higher mix of Vegetable & Proteins. Mother Earth had the resources to serve a 1B people , she is struggling to cater to the bulging needs of 7.2Bn people and may well collapse when we reach 10Bn .  We see this in India – food production has started going down or is flat. The green revolution delivered non linear growth in the 60’s & 70’s but has peaked out. GM Crops may be the only solution – but the side effects are being hotly debated. Add to this farmers see more value in growing vegetables , exotic fruits which deliver better returns than on crops like Rice and Wheat

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Add to this the trend of City Migration. Poverty, dependance on Rains and lack of basic amenities is moving people from the Villages to the Cities in hordes. We already see that the Urban Population is 30% ( thats up from the < 10% in 1960) – as the Cities explode Inflation rises. Land prices have shot thru the roof  and the cost of maintaining a family with decent lifestyle in NCR , Mumbai or Bangalore is at par with the developed western world.

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The formed food minister in charge for 10 years did not help – he piled up food in FCI to rot rather than let it go in the free market.

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And if the Modi Sarkar ushers in Acche Din and the economy starts growing at 8 – 10% , thats going to give a further fillip to Inflation and cost rise. I shudder to think what will be the cost of undergoing a Cataract operation 30 years from now when I am 75 years old – it could be well over Rs 10 Lacs  – thats 20 Lacs for me and my wife. I don’t think I even thought about this and included this in my savings basket. Add a hearing Aid at 10 Lacs + ( Its already 1 Lac). The Bhindi and Beans thats touch 100+ Rs a Kg now could well be in excess of Rs 1000/- a Kg .  These are the necessities you need for survival.

So whats the Solution ?

Will my flat that appreciate 5 times in the last ten years give me value 30 years from now – or will it be a dead investment ? Will the Stock Market investments scale with these expense – or should we start buying large land banks in Tier 3 Cities and pray that they will keep up in cost with Inflation ?

Maybe we eat more Eggs – Roti and Egg Bhurji can be a meal for Less than Rs 30/- for a family of 4 . But Rice , Dal , Curry , Curd can be expensive . So follow the advice of the ad and eat more eggs. Thats one commodity where the pice though increasing seems reasonable ( Current price for 1 Egg is Rs 4/-)

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Don’t worry about investing in your daughter’s MBBS & MD education. A 1 Cr Donation  to a good medical college can be earned back in 1 week ( If 20 years from now Cataract Operations continue their inflation and touch 10 Lacs / person). Now you need to laud the vision of Chidambaram and Son Karti for setting up Vasan eye care – that business probably delivers better ROE than Infosys and Wipro.

Mamta & Mulayam and Kejriwal should stop complaining about the  train hike and focus their attention on bigger things – like why Beans went from Rs 50 to Rs 120/- in 3 months or why the annual rate of inflation for a Cataract operation is 25% – I wish they would , but I know they won’t !

I don’t know the answer – all I know is that my retirement plans at age 45 stand cancelled. But I am really worried and you should be too. The inventions of 1850 – 1900 era and the world development trajectory have really screwed us badly!  Maybe capitalism wasn’t so good after all. Maybe Karl Marx should arise. We had a great run from 1992 till now but as the middle ages hit us and we look upon the second half of our life (Which is not going to be as productive as the last 25 ) a sense of deep concern sets in.  Lets hope it all works out well.

Annexure – 1 : List of inventions that happened between 1850 & 1900 

1862
• Dr. Richard Gatling patents the machine gun.
• Alexander Parkes invents the first man-made plastic

1866
• Alfred Nobel invents dynamite.
• J. Osterhoudt patents the tin can with a key opener.
• Englishmen Robert Whitehead invents a torpedo.

1867
• Christopher Scholes invents the first practical and modern
typewriter.

1868
• Robert Mushet invents tungsten steel.
• J P Knight invents traffic lights.
1872
• J.S. Risdon patents the metal windmill.
• A.M. Ward issues the first mail-order catalog.

1873
• Joseph Glidden invents barbed wire.

1876
• Alexander Graham Bell patents the telephone.

1880
• The British Perforated Paper Company invents a form of
toilet paper.

• In 1881 Alexander Graham Bell invents the first crude
metal detector and David Houston patents the roll film
for cameras.
45

1884
• Lewis Edson Waterman invents the first practical fountain
pen.
• Charles Parson patents the steam turbine.

1885
• Harim Maxim invents the machine gun.
• Karl Benz invents the first practical automobile to be
powered by an internal-combustion engine.
• Gottlieb Daimler invents the first gas-engined motorcycle.

1886
• Josephine Cochrane invents the dishwasher.
• Gottlieb Daimler builds the world’s first
four-wheeled motor vehicle.
• John Pemberton invents Coca Cola.
1887

• German, Heinrich Hertz invents radar.
• Emile Berliner invents the gramophone.
• F.E. Muller and Adolph Fick invent the first wearable
contact lenses.

1888
• Marvin Stone patents the spiral winding process to
manufacture the first paper drinking straws.
• John Boyd Dunlop patents a commercially successful
pneumatic tire.
• Nikola Tesla invents the AC motor and transformer.

1891
• Jesse W. Reno invents the escalator.

1892
• Rudolf Diesel invents the diesel-fueled internal
combustion engine.
• Sir James Dewar invents the Dewar flask or vacuum flask.

1893
• American, W.L. Judson invents the zipper.

1899
• J.S. Thurman patents the motor-driven vacuum cleaner.

Who says Inflation is 7 % ?

The latest issue of Business India has a cover story that talks about workers in Hero MotoCorp demanding hefty annual salary hikes that would translate to them earning about 1 Lac /month in next 3 years. I hope it happens. Corporate India, the rich  (the 42,000 people who officially earn more than 1 Crore / year) , the IT workers, Successful Businessmen & Traders  – get richer & richer, while the common man on the street struggles with his day to day life.

I do my neighborhood walk once in a while (Its more of an obstacle course these days with broken footpaths & cars parked all over) and it was interesting to see the increase in cost of a few items that we all tend to consume regularly.

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Coconut water is healthy and is now available every 500 m in major Bangalore roads. A truck visits these footpath outlets twice a day and delivers stock. (Looks like there is s smart entrepreneur who has figured out a big business opportunity with no investment). For many years you could get a nourishing coconut drink for Rs 10, a few months back it became 12, had a fleeting stop at 15 and has now rested at Rs 20/- .  That’s a 100% hike in the last 12 months.

Every Sat morning after my visit to the temple I stop by at the Darshini or any other standing joint and have a cup of Coffee. I always carried coins for Rs 6/- so that there was no hassle of change. The price of Coffee went up from 6 – 8 – 12 in less than 6 months. Again a 100% hike.

I also visit Ballal Residency (Residency Road) frequently on my way back from the Gym. My normal order would be a Moosambi Juice, Idli Vada and a Coffee to top it up. Normally its about 80 Rs – yesterday when I gave the 100 rupee note the waiter pointed the bill and showed me the rate as Rs 180/- . Again a 100% + rise.

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The truth finally sunk in when on my evening walk I stopped by at a Puchka seller (Gol Guppa) – something I do once in 6 months when temptation kills rational thoughts. A plate of 6 used to cost me 60 P many moons back when I was a kid, but for many years in Bangalore it was Rs 10, became Rs 12 and is now Rs 15/- . A 50% + Hike.

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And finally the Sona Masuri I have been buying for Rs 38/kg for the last few suddenly shot up to Rs 51/Kg ( A 30 – 40% increase in a few months)

Government, RBI & Economic Survey data claim that WPI Inflation is now under control at 6 – 7%. (And I wonder how they calculate this). The inflation on the street is easily upwards of 15 – 20%.  And if we create an Index that consists of Vegetables, Fruits, Cereals, Petrol, and Transportation Costs – we may well see the rate of Inflation well above 25%.

Companies like Hero, Bajaj, Mico Bosch, Maruti Suzuki and many other manufacturing firms hire less than 50% of the staff on their rolls, rest are contractors and pay them very low salaries and hardly any perks. I have heard that a Diploma Mech Engg in a Pune manufacturing plant works 6 days a week, 12 hrs. shifts and earns Rs 7- 10,000/- month.  Labor Unions have become meek and even Hindi Cinemas no longer focus on the challenges of the poor but take us to magical lands of joy & prosperity. (Here is an opportunity for Abhsishek Bachan to come back in some of his father earlier avatars as the messiah of the poor)

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Source : Trak.in

India is growing but we are a country where 650 M do not have basic sanitation facility and less than 10%  of our 15 M wage earners have an income of > 1 Lac / Year . I shudder the think how the common man earning 15 – 20 K / month manages his daily life.

onion-prices-80-higher-than-last-year

The price of Onion is up by 80% and many a Govt has seen its fall when the price of Onion goes up drastically. This divide and the sense of helplessness amongst the common man  is fast going to accelerate the sense of anarchy that is spreading across the nation.

As Mr Modi says its time for a Government with Mission to come and fix the mess in the country while those who survive on Commission are shown their way out.

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