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Sunday, December 4, 2011

INDIA and US economic differences as viewed by a common man

I have very closely observed the financial structure and fluctuating economy of both the countries. Though US economy works on Capitalist form and India works on Socialist economy if one goes deep you will find that US economy is very much constrained to government fiscal policy structure than the actual financial management system which really functions in the country. There is something known as Individual economy and federal economy. The sum total of Individual economy is the federal reflection of economy than the economy shown by the institutions or lending organization.
In India as in many other spheres of activity there is anarchy which does not therefore follow any single form or route of control whatsoever. So India and US cannot be compared at any given point of time- India's major challenge is distribution of economy and invisible economy of individuals. Let me highlight few interesting facts of Indian economy which never goes recorded-
1) Indian individuals have world’s highest percentage of unquantified gold reserve in their homes and custody which has highest price fluctuation and resale value as a metal.
2) India is second largest country which is basically a saving centric society from time immemorial.
3) Cash transactions constitute more 60 % in India which does not reflect in any records.
4) India’s marriage expenditure alone is more than 12 billion dollars of which 80% is cash expenditure.
5) Agriculture income and expenditure, Real estate transaction, film industry, Transport are not still not structured to understand the actual revenue involved and actually earned.
6) 60% loan and financial lending is done by individuals that are not recorded.
7) Vegetables/Fruits/Milk which is sold in a non structured way constitutes more then IT industry revenue; the estimate is around $24 billion dollars.
8) Parallel economy is steady and is stronger in India which makes good cash circulation.
9) Agriculture and Manufacturing industry at least to some extent drives India economy.
10) Recycling industry and scrap industry is the most vibrant revenue earning and active industry in India which constitutes more than Rs.2000 crores which includes products from beer bottles to news paper to plastic bags-
11) 25% of individual income and saving are spent in education, rituals spiritual and religious activities.
12) Indian economy is cash driven; US economy is book driven, and plastic card driven
13] US economy works on debit and credit on books- All US cash reserves float in USA to work as International fluctuating currency system where as the India economy solely depends on internal cash circulation system thus not allowing floating outside India as a speculative cash currency system.
14] US economy is monitored on mortgage, consumer purchase, Car sales, lending rate as parameter; where as Indian economy is monitored on US dollar exchange rate, gold rate and share market status and foreign exchange reserves. Today India has strongest purchasing power at individual level which cannot be really assessed or monitored. Individual asset holding in India is prime motivation and driving force for Indians to save.

With these points I unfold the major difference of two countries economic appraisal parameters which will show that India economy is not dependent on US economy except a small percentage of visible business such as IT is of course dependent. The great potential of India is the growing per capita consumption anticipated by all Multi nationals in India considering the population and purchasing power growing day by day is the greatest temptation for all Multinational Corporations to do business in India and therefore it is not a surprise that a sinking ship called WALMART is crying for FDI in India.

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