It is easy to sit in India and look at the problems in America and Europe. For many of us it has also become fashionable and say:

-Americans do not know how to save, many of them do not study enough, …etc..etc

But PLEASE do remember it is the economy which is closest to reality. People pay market prices for everything that they consume. There is no subsidy. Except of course some things like farm products.

People pay market prices for energy, transport, education, health services, basic sanitation, …..

In India we are STILL being pampered with

subsidized public transport: if we were to privatize our train services, or charge at least VARIABLE COST IN FULL + A PORTION OF THE FIXED COSTS..the fares will have to go up by 200-300%, at the minimum. After that it has to be indexed.

subsidized education: good, well run schools in Mumbai are subsidized – and the students pay Rs. 8 per month per child. Is this low? well my MOTHER paid such fees – and she is 74 years old. So much for inflation.

subsidized sanitation: the charges we pay for keeping our houses clean – being provided by the Municipalities is not commercially priced. Far from it. this will go up, and go up dramatically soon.

subsidized water: if you have grown up in some lucky parts of India you do not even know what is a water shortage. This excellent potable water (in places like Mumbai where I live till not so long ago) is perhaps the cheapest in the world!

So even if you have a high income, be prepared for certain expenses going through the roof…when you least expect it. The American on the other hand gets paid for the job he does, he could get laid off, he could change career – from selling cars, selling life insurance, being a carpenter …..BUT he pays market price for every thing he uses.


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  1. Subra,

    In Mumbai, till recently we were really spoilt with excellent potable water. When I moved to Ahmadabad in 1995 – I was shocked to know that there is something called drinking water and borewell water!

    Education part – I am not so sure. I do think in Indian conditions we do need subsidized education.

  2. why do we need everything subsidised and American salary? In Mumbai we still have tap water which can be drunk – some of us are spoilt that we think it has to be boiled, filtered and then….but we happily eat vada pav in the road side eatery. We are like that only, Subra Sir!!

  3. Indians who are optimistic about India, sorry to say, may be people who have not travelled abroad? Look at the Germans and the Americans – you will realise that we are not as hard working, we have too much corruption, and run a HUGE trade deficit.

    All the best, but I do think we assume that foreign inflow is our birthright. Hey MMS, 2003-2007 was a magical period.

  4. @SAM, Drinking water and Borewell/Flushing water are now separate even in Mumbai nowadays in the newer buildings. Water for gardening is compulsorily separate either with rainwater harvesting or sewage water recycling.

    Subra, another area which is artificially low in cities is the cost of domestic help. Servants are easily and cheaply available (though the easy part is getting harder in some of the new localities) mainly because of the continuous influx of migrants into Urban areas. This will soon end as the cost of living in offsets the earnings potential there. Then the relative cost of domestic help will rise dramatically and will become unaffordable to most families (much like buying a house is simply a dream for young couples nowadays). I estimate around 5-10 years for this to happen, inline with the vanishing ‘demographic dividend’ of India.

  5. @rahul p. .you made a lot of sense.except when it came to ‘ trade deficit’. trade deficit is an accounting terminology .nations dont trade,people doesnt matter if there is a political boundary that demaracates where i buy my cellphone from. does it matter if bombay has a trade deficit with nashik? obviously not.similarly it doesnt matter if there is a ‘trade deficit’ between india and its trade partners -because india doesnt trade.individual indians do.
    the real problem is the fiscal deficit where the govt behaves as if it owns all the productive resources of the economy. isnt it bizzare how pundits calculate fiscal deficit as a %ge of the GDP and not as %ge of the revenues.
    dont you personally run up a trade deficit? dont you ‘import’ clothes,food,fuel,housing,entertainment and everything else while exporting as little as possible (ie dont you try to maximise your income and savings and try to obtain a good deal for every purchase you make?)

    there is a lot of humbug about trade deficit.the right reaction is to ignore the uninformed rants

  6. 2003-2007 was a magical period alright.brought about by massive money printing in the aftermath of the 2001 dotcom bust.
    everyone should read Jen Parsson’s ‘When Money Dies’. the initial impact of such massive inflation is euphoric.everyone seems to be rich and doing fine,thatis why nobody complains.the problem arises when it is time for the malinvestment to fail and prices rise uncontrollably. the bust is caused by the boom.yet nobody complains during the boom

  7. I definitely feel the subsidy should be removed, that to completely however i dont agree to the fact that we will have to pay more for sanitation or water, I live in Bangalore and almost in the center and there are no roads or water in my area, we pay yearly taxed i mean the municipal tax and i have no idea what is done with those taxes, probably goes in subsidy.

  8. Is there still a fantasy land in Mumbai? Railway no one uses anymore. But tell me onething apart from rent and costing more than 1k which is cheape. Moreover we pay more for cheaper quality as well. In Bangalore we even pay more for water.

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