Daily Reads-52 (Level-1)

Reading Suggestion-1

Article Name: Economic forecasting is not a science
Author Name: Prashanth Perumal
Source: The Hindu
Category: Economics

Summary for this article:

As per the author, forecasting the exact figures of how a nation’s GDP will reflect after a massive exercise like DeMo is not a cakewalk. Although the wise economists can make some useful predictions, the points that author mentions is not to say that they cannot make any good decisions for the economy. Their decisions can be likely more inclined towards the qualitative aspect rather than quantitative. It is known that money greases the wheels of the commerce, and flushing out it from the economy can definitely create chaos across production lines would affect demand in the market.

The author cites three reasons as to why forecasting economics of a country is not a science.

First, merely some data points cannot prove/disprove a hypothesis as they do not establish any cause and effect relationship. Just because the post DeMo period slacked in growth, that doesn’t mean that DeMo was solely responsible for that. Also, the Q3 results were pretty strong, that doesn’t signal that DeMo had no effect. Economics of a country is a complex organism in which lot many factor work in tandem.
It is different from Science because we have physical variables in Science which we can control unlike Economics.Second, we cannot take cases from history and prove the same effect in future. People’s perception changes over time and can in turn affect the economy. For eg – people’s perception towards DeMo may have motivated them to go further towards cashless economy, thus bolstering the economy.
Third, Macroeconomic forecasting is focused on measuring things that are fundamentally immeasurable. So we cannot simply rely on the statistics.

Words to learn from this article:

Sermon: A talk in which someone advises others how to behave in order to be a better person
Pundit: An expert of a particular subject who is oftern aked to give an opinion on that
Lousy: Very bad
Slump: To fall suddenly

Reading Suggestion-1: Click to read full article

Reading Suggestion-2

Article Name: The crops of Wrath
Author Name: Harish Damodaran
Source: The Indian Express
Category: Economics

Summary for this article:

It was speculated that due to demonetization the crop yield will be severely affected, however, the crop produce was abundant all because of conducive effects of timely onset of winter, good monsoon, deferred payments for labor, purchase of seeds, fertilizers and pesticides. All these led to a bumper crop. But, hold on! This does not mean that all were roses! While the yield were in abundance, the farmer was not getting the needed monetary support that he is entitled to get. Since the complete agriculture market is solely based on cash, DeMo had its toll on the pockets of the poor farmer. Post DeMo, we saw the reduction in the Minimum Support Prices for most of the important crops. Earlier, while a 10% production shortfall led to prices zooming upto 200%, now the case was just the opposite. A 10% increase in produce caused a 200 % price collapse.

Not only DeMo gave a body blow to our farmers, but there was another reason as well. It is ‘Inflation targeting’. The finance ministry and RBI are there to regulate CPI to 4% plus/minus 2%. (CPI – Consumer Price Index – CPI is a statistical estimate constructed using the prices of a sample of representative items whose prices are collected periodically).

Unlike other countries, India has a very disproportionate share of food and non-alcoholic beverages in its CPI, which stands at 45.86%. (UK – 10.3%, Canada – 16.41%, New Zealand – 18.84%). So in order to regulate the CPI, the government tries to depress the farm prices, ultimately aggravating the farmers’ finances.

After all Inflation is not about prices of goods and services going up or down. It is about whose prices are rising and whose are losing, in short the winners and the losers. And in the current deflationary environment, the farmers are the clear losers.

Words to learn from this article:

Body blow: Something that causes serious problems and disappointment for someone trying to do something.
Conducive: Providing the support or right conditions to something so that something good can happen or exist
Haemorrhage: A sudden or serious loss
Wrath: Extreme anger
Weathered: Weather-beaten

Reading Suggestion-2: Click to read full article

Reading Suggestion-3

Article Name: As you sow
Author Name: Anoop Kohli
Source: Times of India
Category: Politics

Summary for this article:

The author in the article, taking the stance of the farmer, asks the reader about the atrocities faced by an Indian farmer in the so called pro-farmer society. He questions the ministers’ tax exemption benefits because of possession of agricultural lands. A farmer is not allowed to negotiate for his own grains, forcing him to kneel down before his self-chosen ministers and beg for financial assistance so that he could replace himself as the second bull ploughing the soil the second time.

On a talk with India’s first agronomist, Shri Sharad Joshi, author puts up an example that how the cost of a movie ticket has multifold 200 times while that of onion-tomato has merely doubled. They also say that there is no benefit to claim this injustice. Upon interference, it was no surprise that Mr Joshi was relieved from all his responsibilities by a ‘politician’.

He says that a wise government is the one who takes the opportunity to overhaul the entire agriculture system. Provision of better electricity, hybrid seeds, education about pesticides, proper investment of loans, and a good fund manager – who will guide farmers about the crops to be sown, the demand in the market, and other basic information on a one to one encounters are some of the measures that a government can proactively take.

Lastly, the author cites that private participation can also prove to be a boon in this case.

Words to learn from this article:

Meandering: Zig-Zagging, moving slowly in no particular direction or with no clear purpose. Eg – the meandering river, a long meandering speech
Frailty: Lack of strength and weakness. Eg – a frail old lady
Sagacious: Having or showing understanding and mental discernment. Eg – sagacious person/choice/comment