ArpitGarg's Weblog

An opinion of the world around me

Indian Economy Strong: Funda-mentally

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Last few days have witnessed regular assurances from finance ministry, RBI governor, CEO of leading Indian banks as to how India would weather the global financial storm. All the assurances had one thing in common, “The fundamentals of our economy are very strong”. What these financial fundamentals really are? How to understand them? Well, I have one approach ready for you. As they say “Cinema reflects the Society”, let’s start our search for the economic fundamentals via the fundamentals of Indian cinema.

“Thakur, jaan pyaari hai toh Tijori ki chabiyaan nikaal”. Who doesn’t remember this legendary line? Immortalized by Thakurs ranging from Kanhaiyyalal to Madanlal and Dacoits cum Robinhoods ranging from Raj Kumar to Sunil Dutt. Another such scene is where the greedy Thakur opens his Tijori to lend money to the poor Kisaan at high interest rate. Here the most important fundamental is Tijori. Our society too cherished this personal Tijori. Down the years, the Tijori got replaced by a bank locker for quite a few. Barring the recent trends, we are not known to be ardent investors. We do save money but most of us do not invest in other than the popular LIC policies. We all have such Tijori’s which keep our money safe and sound if not reap returns. Before you point out the decreasing worth owing to inflation, keep in mind that we usually keep our savings as gold, silver etc. But the Tijori persists.

“Kaam ho jaiyega Seth. Paisa mere Swiss bank account mein pahunch jaana chaiye”. This corruption and surplus black money has helped avert the mortgage crisis in India. Consider a house with market value of 1crore. Usually one pays 50lac in cash and 50lac via cheque. This ratio may vary from 40:60 to 45:55 or vice versa. The cash is what is usually called number 2 ka paisa. For the rest 50lac, we apply for a loan. Even if the property rates fall to say 80lac (from 1cr initially), unlike Americans we don’t forego our property to the bank. After all the current market rate is still greater than the loan due. So the black money in property business has not let mortgage crises come to India in the way it has rattled US. (for more read http://www.swaminomics.org/articles/20080330.htm)

“Madam hum ICUC bank se aaye hain. Aap loan chuka dijiye warna hum bahut kameeney log hain”. This dialogue delivered with pure sincerity in the movie “One Two Three”, gives us clear insight as to the low default rate in India. The loan is distributed via agents and settled via another set of agents, while the bank sits pretty. Should the leading banks go the legal way, it would take them at least 20 years to settle. Agree or not, this so called extortion has kept the so called fundamentals of our economy sound.

“Bhaisahab yeh Mangal-Sutra girvi rakh leejiye”. Nirupa Roy in need of money for the treatment of her sick son. Here mangalsutra is the key. Most of the Indian families have household jewellery. Ask your mother for confirmation. Regardless of the bank balance, there have to be sufficient diamond/gold/silver ornaments to be worn at various ceremonies. This domestic wealth is the one which has helped many a family sail through the dark times.

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