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Sunday, June 2, 2013

The economics behind Ugly little butterflies

I always felt it a little hard to digest the claims made by great minds that all of us however insignificant may or rather will have a part to play in the way our lives unfold. An empowering feeling nevertheless. The profoundness of which struck me when I first heard of the 'Butterfly effect'.

The butterfly effect is the phenomenon whereby a minor change in circumstances can cause a large change in outcome.How a flapping of the wings of a butterfly in Amazon can cause change in weather patterns in Asia.

We often question 'How one isolated goodwill guesture can effect a change or even snowbowl into revolution'. I found it the hard way, all of us do. Every nonfunctinal aspect of the society traces its roots back to us. For a country that is deeply entrenched in the idea of patience and tolerance is now finding
the same quality manifesting itself as submissive acceptance of the current state of being.Being vociferousness is not the 'in-thing' thing anymore, even if it were to stand for what is rite. The mindless race for the 'White-color' has brought with its sterio-types that neither make scene ethically nor eonomically.We seem to be left with a growing list of cities that are full of directionless zombies, no wonder Bollywood(Indian film industry) too is showing interest in such movies lately !!!!!

We seem to have taken our sences so much for granted that ,we have forgotten to react to them. How else would you explain the case of an auto-wala(driver of a local commuting facility) not just being unreasonable with the rates ,but also justifying those insanely high rates, whats more with generous showering of tantrums that he's stacked up in plenty as they are fired on the hapless public who to begin with are caught unawrares and then helplessly take refuge in the security of their sojourn.The see-saw between the governig body and the public, priorities and ethics have to be balanced out to get it to steady state.

Lets talk numbers now . How does this butterfly flapping causing waves effect the bigger picture. The CPI(Consumer Price Index) which is a track of the increase in the rate of essentails against a set benchmark. The transport costs have a 7% weightage across India in the CPI.The CPI has gone up from 114.40 in 2010 to 127.5 in 2013, inflation
as a result has gone from being close to 7.5% to 10.3% now. What is to be noted is the WPI(Wholesale price index- prices at which essentils are bought at the wholesale market) 6.68% has grown at a slower pace than that of the CPI which means that the intermeiatory costs are more than real increase in Inflation.

Here's an attempt to identify the Root-cause of the same. I commute by a autorickshaw for a streach of 3 km a day back and forth. The auto rickshaw guy in the 3 km trip earns 15 Rupees * 6 = 90 Rupees pertrip. which is 30 rs/km. The mileage of the vehicle is 35 km/litr. diesel costs 50 rs/litr. A simple math tells me that
he spends 1.4 rs per km. Now that is a wooping 99 % gain. Considering that 60% is of it goes to the owner and a 20 % is the rental for the vehicle.He is taking back home a substantial chunk.Now what is more relevent here though is that some percentage of that 90 odd % increase is going to make its way into the retail prices.

There is every reason to believe that the 30% gap between the WPI and the CPI would be addresed partly by this opportunistic pricing by the autorickshaw fellows.This is only the tip of the iceberg, the story of one butterfly . There is no guessing in as to how many diferent ways this evil is currenly haunting us.Consiering that the Rupee is valued based the purchasing power of you and I and Inflation being the key indicatior or factor to determine the monitory policy of a nation. You and I can make a contribution in mitigating at least to some extent the damages.



STAND UP FOR WHAT IS RITE IN WHAT EVERY WAY YOU POSSIBILY CAN. DO NOT EVER UNDERESTUMATE THE POWER OF ONE SOLITARY BUTTERFLY.