Welcome, all! The first "businessbanter" Is here and here in this very first blog, I will discuss something that all my audience needs to know. The basics of how our economy works, who contributes to its functioning and who are the ones exploited. To begin with, I will assume most of you are aware of the basic concepts and terminology.
1. So how does an economy work?
For any economy to work a few basic concepts and ideas are taken into account to give the entire measurement a quantitative outlook. Some of these metrics are mentioned down below-
The Income Factor-The most important factor for an economy to function is revenue and income it earns. Without income or revenue, an economy will fall. Because to function to survive everyone needs Money. Various tools like GDP Per capita are used to measure the income and earnings of a nation. The income of an Average Indian is 1,56,744 (As this figure includes the income of the poor and super rich's Average)
GDP Per capita- So the GDP and per capita GDP is what gives us an idea whether in our economy every individual has a good or poor standard of living. As an economy is not just made of the richer class and also constitutes the lower and middle, it divides the country's gross domestic product by its total population. That makes it a good measurement of a country's standard of living. It tells you how prosperous a country feels to each of its citizens. India's GDP/Capita is 2,058 compared to 62,795. This shows there is a long way to go fir India still
Inflation-Another point could be inflation which is a state of rising prices (Note: It is not a state of high but “rising” prices). Which generally occurs to high demand and often when there is more currency in circulation than the actual worth of the country(Hyperinflation). India has decreased inflation over time but still has a high inflation rate of 4.1%.
Trade Balance-The trade behaviour and whether an economy is global or not also adversely affects an economy’s behaviour. The trade balance which measures whether a country is export-oriented or import oriented is also a very important means of identifying an economy’s strength in the global arena. India has a negative trade balance of almost 10 Billion USD in March 2020.
The central banks and their policies- The most crucial and the supreme power in any economy is their Central Bank. They control the monetary policies, the FDI, currency regulation, supply of money and everything one can imagine and considers important in our economy except of course the incomes of an individual.RBI is the Central Bank of India which has regulated the repo rates(The borrowing rates of banks).
[This image shows the GDP growth of India]
2. What constitutes an economy-
In an economy not all individuals are alike, thus there are a lot of differences in an economic arena. And each has its own contribution towards building a strong and resilient economy. So who are the contributors, let’s take a look at them.
The lower class- One might think that the lower classes, the daily wagers, how can they make or break an economy. The answer is the labour force. Though cheap labour and poverty are not what one looks to find in an economy but it does provide a labour force like no other and due to the immense amount as of 2014, 49.80% daily wagers were in India, and hence due to these many people the revenue multiplies to be of a very large amount thus they are an important contributor to the economy. But sadly they are the ones who can’t survive in economic crises and this leads to death due to hunger and depression which an average Indian won’t even think about.
The middle and upper-middle-class- This is the class that when economic crises comes can survive them the “Middle class”, can easily afford their meals and basic necessities but when it comes to other luxuries like a car or house they have to consider everything. They are mostly small shop owners and employees with an income for a family of 4 ranging from 8L-13L per annum and hence add to the taxes and GDP of an economy. The “Upper middle” are the ones with an average income for a family of 4 of 15L-50L per annum And for them, even the basic luxuries like a new iPhone can also be affordable.
The Upper and Elite Class- “The upper class” with an average “annual” income between 50L-Cr. and who can afford almost anything a middle segment Sedan or SUV and 3BHK or 4BHK flats, they are the big contributors to an economy. And amid an economic crisis, they can easily face and survive it. The “Elite Class” are the ones who are above the Upper class and below the super-rich, for them and almost every luxury is what they can have. With incomes of about 10cr. per year.
The Super-Rich and the billionaires-These two classes are the prime faces of an economy who are seen as the role models in any country with incomes of 100cr and above a private island, yacht, Private Jets are even something they can afford. Considering out of 1.32 Billion people only 144 are “Billionaires” we can imagine how rare they are. But these two classes are mostly the highest taxpayers as they are under a constant view of the Income Tax Departments.
My views on the Economic Overview-The Indian Economy is driven by Agriculture dominated by the Daily Wagers and though, these big net worth individuals and billionaires contribute a large amount to the taxes and revenues of the economy but the agricultural sector and daily wagers cannot be ignored for their contribution. They are the once affected by these economic crises the most and year after year they have just uplifted the economy.
[This image shows Average Daily wages of the Indian Wage Earners]
So is it good to be a nation with poverty? Of course not. What we as an economy need to do, is create more jobs to remove the unemployment and help the one living Below Poverty Line, then the focus should be shifted to improve the daily wagers condition which, as of now has a minimum daily wage rate of 178 Rupees. So if these loopholes are covered it will lead to better opportunities to the lower class, which will lead to better production rate and would finally lead to better economic growth and a flourishing GDP.