Hello dear CAT 2016 Aspirants, we know you're eagerly awaiting your results that are most likely due by the second week or the third week of January. You've also been religiously following this segment/column/General Awareness post authored by Mr.Balaji Vishwanathan. We thank your continued support. As per the request of some of the students, we have decided to provide some insights so that you can get some direction and perspective before you start reading our posts on Economics and Politics.
The Background:
There is a story about how the Indian Rupee held its own against the US Dollar, how 1 dollar was equal to 1 rupee in 1947 and the like. The link to a brief chronology of the Indian Rupee against various currencies is given here: https://en.wikipedia.org/wiki/Indian_rupee_exchange_rate_history. Read up on it and continue to the small article (or monologue) below.
Q: What is the real story of the American dollar vs. Indian rupee?
A: India doesn't have a gold backed currency. That means if you go to the RBI and ask for gold in return for the note they printed, they will not give any. Same in the case of US and elsewhere in the world.
Next, this "buy only Indian stuff" is stupid and an outdated idea that we practiced until the 1990s. Our economy started growing only after we started throwing out these idiotic economic policies. This is called Protectionism.
If Indians block foreign products then foreigners would block Indian products too. Any gain from reducing imports will be more than destroyed by reducing exports. Rather than reducing imports & exports, we should be looking to increase them both, probably 10 times from our present levels.
If you want to help the entrepreneurs, make it easy for people to run businesses. Provide them easy access to reliable electricity, make it easy to file forms online and make taxation both simple & low. Those would help Indian companies more than any protectionist crap.
India's consumers need access to the best products at the cheapest rates. That would come only when the best companies in the world compete with the Indian ones. If it doesn't happen, we will go back to the 1970s & 80s, when you could buy only Indian stuff, coke was banned etc. Ask your parents how brutal that period was for getting jobs or buying even basic things like scooter and telephone.
Background
Many of you would be familiar with the band in the picture below and many of you might even be wearing it out of the love for Bob Marley or to 'send a message' or to look cool. Let us look at what it means and trust me, it has everything to do with the Economy of Africa. Though Jamaica in essence has nothing to do with mainstream Africa, the band which represents Rastafarianism: the green representing the dense forests, the Gold (which Africa was wiped clean off by White Imperialists and enslavers), the Red representing the Blood that was shed. Now, armed with that knowledge please continue into the little article and you should get a clean idea of what is going on with the African Economy.
Q: Why do Africans not benefit from the vast amounts of natural resources that dot the continent?
Africa is not that rich in many critical natural resources. US or Saudi Arabia alone produce more oil than the entire continent of Africa. List of countries by oil production. There is not as much water in a large chunk of the continent compared to United States or even China. And it has far less fertile lands. Thus, the 3 critical resources for humanity - energy, water and food are not in plenty.
Here are the world's top countries by natural resources - Top Ten Countries with Most Natural Resources - and no African country comes up there.
Africa seem to export a lot of natural resources only because there are not enough domestic companies that can process those resources into high value components, unlike other places with abundance of natural resources. This is why countries that export the fewest of natural resources are in general richer, because they always find a way to build a value layer on top of that. This value layer is where employment is.
The way to benefit from the resource is to create valued added services on top of that. Thus, instead of exporting iron ore, you refine it to steel and then machinery & automobiles with it. With this, you will have jobs for miners, factory workers, engineers and mechanics. The deeper you are in the value chain better the benefit will be to the people.
To get deeper into the value chain, you need visionary leaders, spending on infrastructure & worker training and setting up the environment for businesses to operate freely.
(The Question and Answers are authored by Mr.Balaji Vishwanathan, a Top Writer on Quora.)
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