29/03/2019
Let us imagine that four persons in India (Mr A, B, C and D) have inherited an income of ₹2,00,000 per month .
Let us also imagine that the inflation is zero and the value of the rupee does not diminish with time.
They may choose to live their life in the following ways.
1: Spending
Mr A lives a life of luxury. He engages couple of servants and pay them a good salary. He buys expensive consumer items and enjoy his life. He saves nothing.
2: Saving
Mr B decides to manage his expense in ₹100,000 only. He deposits the remaining ₹100,000 in bank which keep growing with time with compound interest.
3: Investing
Mr C also manages his expense within ₹100,000. He, however, starts a company where he invests the rest of his money and employs couple of professionals .
4: Charity
Mr D also manages his expense in ₹100,000 and spend rest of the money by giving charity of ₹10,000 to 10 poor people to support them in education, building houses for them and for meeting their day to day expenses.
Now let us fast forward the time to 10 years and see what may happen to them during this period.
1: Mr A
His family size increases with time and so his expenses. He gradually finds it difficult to hire as many servants. He removes them one by one and purchases less consumer items with time. His standard of living deteriorates with time and the per capita income of his family deteriorates with time as more members are added up.
2: Mr B
He is able to maintain the same lifestyle over time. As his family grows, so does his savings. In 10 years, he has a good bank balance, which provides him additional source of income.
The country also develops better since the money he deposited in bank was used for giving loans to businesses, which adds to the economy in terms of employment and tax revenue.
3: Mr C
His company grows with time and now employs over 100 people. The turnover is in several crores and he pays several crores of taxes every year to the government.
He earning today is 5 times more than what it was 10 years ago.
4: Mr D
When he started giving half his income for charity, he got immediate social recognition. His name was published in several newspapers and the 10 individuals who got charity of ₹ 10,000 blessed him for his kind act.
However, after 10 years, these 10 poor people got married and now have families. Their expenses have gone up substantially and so have their demands from Mr D.
Mr D is now giving ₹1,50,000 to support these 10 families and left with only half the income while his family has also grown to four persons.
These 10 people are not even grateful now since they have now taken the assistance as a matter of right. They are rather cursing Mr D for not taking care of their families (which is now having 40 members).
His life is the most miserable.
What is wrong with India?
India is following the path of charity like Mr D by spending its income in distributing freebies like free housing, free education, free healthcare, loan waivers etc. The more Government gives, the more expectations are growing and the more these people are getting used to government charity.
Government now can’t even imagine to withdraw such freebies.
Gradually such populist measures are going to kill Indian economy as even if the Government spend all its revenue to the poor, they won’t be happy.
What should be changed?
Let India follow the path of Mr C and start investing in productive assets. India is earning almost ₹40,00,000 Crores of taxes every year. If they spend even half of the taxes for creating productive assets, its economy shall grow leaps and bounds in next couple of decades.
However, it seems unlikely in the present scenario since people are getting so addicted to freebies and instant gratification that they have no thoughts for the future of India.
If Indian politicians keep following the present polices, the days are not far when Indian economy would collapse under its own weight and join the list of failed economies in the world.
Forwaded.
