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Yogesh Gupta

Reservoir Engineer, Shell International E&P

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Can someone please correct my economics?

In India, 55% population is working in agriculture sector, 20%-25% in service and industry sector, 7-10% in public sector, 10% nearly unemployed.

Though the service and industry sector in India contributes the most to the GDP (55%), population wise it employs the least (20-25%).

If say the developed nations demand less goods and services, this would mean developing nations like India would see fall in exports of goods and services and also see fall in its imports of energy like oil an gas. This would create a surplus of supply in energy sector and costs would go down.

Hence, if the developed nations reduce the import of goods and services from India, I agree it may contribute in less income to nearly 20-25% of the population involved in the service and industry sector, but would help nearly 70% of the population to have an increase in their income as their energy costs (direct and indirect) go down.

The current economic difference between the poor and rich is very high. I believe this slow down will give time to the country to bring about a balance.

In the current economic crisis, many companies let go the most experienced staff or elderly staff and retained the young ones since they are low cost to the company. I believe similar effect will be seen if a slowdown happens in India. The rich elderly executives will be forced retired (can still lead a good life) and on the other hand the 70% population gets a chance to catch up with the rich.

Let me know if i am missing something in my view.

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    Dec 12 2012: You do not understand basic economics.

    The road to prosperity and a higher standard of living for all is through trade. Your notion of reducing trade is the wrong direction.

    You do not care about economic inequality that is a canard used by individuals who are dubious and seeking to better themselves at everyone's expense. What you care about is economic mobility. China's per capita GDP has gone from 500 per year to 7000 per year in the last 10 years that is what you want screw equality you want the chance to improve your lot in life.

    http://www.ted.com/talks/yasheng_huang.html
    • Dec 12 2012: Pat, you are the one making rookie mistakes here: once you get to the level of entire continents with billions of people there's not going to be much of an improvement to be had from economics of scale.

      Income inequality and social mobility are deeply connected, after all, if income inequality is large it is hard for the poorest to pay for an education since the price of education is influenced by how much money the richest are willing to spend to ensure their children an education, also, if larger income inequality makes it easier for existing businesses to suppress upcoming competitors.

      You mention rising GDP (China's GDP is acutally much lower, you cited PPP, which was already 2800 in the year 2002, not 500), but if you do not account for income inequality that rise may be entirely due to a few billionaires getting richer: if Carlos Slim moved to Somalia that would instantly double the country's GDP. This is besides the fact that rising income inequality means workers get a smaller cut of the revenue their labor generates, which is fundamentally unfair.
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        Dec 12 2012: Economies of scale are completely irrelevant to this conversation.

        "Income inequality and social mobility are deeply connected"
        That is the meme and it is complete crap.

        Yet China buys the most Rolls Royce s in the world, they have a purported GDP of around 10 trillion. That would be 10,000 billionaires. Me thinks not...
        • Dec 12 2012: "Economies of scale are completely irrelevant to this conversation."

          No, it's not, trade for trade's sake is pointless: two separate blocks of 3.5 billion people won't fall behind one block of 7 billion people. Unless one of those two blocks sits on all the oil while the other one sits on all the lithium or something like that.

          "they have a purported GDP of around 10 trillion. That would be 10,000 billionaires. Me thinks not..."

          They have a GDP of 7.5 trillion, they also have over a million millionaires and many more who make five figure salaries while there are still hundreds of millions of Chinese who make three or four figure salaries. The point is that you can't know where GDP growth comes from until you have a look at the income inequality figures.
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        Dec 12 2012: As usual what the hell are you talking about.

        "they also have over a million millionaires"

        lets check the math on that, that is at least 2 trillion dollars or 2000 billionaires which is slightly more accurate than 10,000 billionaires. But Forbes estimates only 1153 billionaires in the world, not just China?
        • Dec 12 2012: "lets check the math on that, that is at least 2 trillion dollars"

          Income (which GDP is the sum of) and amount of wealth owned (which the term millionaire applies to) are not the same, so you can't do your "math" like that. My point is that a country where 700 million people make $800 per year and 600 million make $10.000 per year is very different different from a country where most of the 1300 million people make around $5.000 per year, yet they have the same GDP and GDP per capita. The former case is much closer to the real China than the latter. It's just elementary math: when you know X + Y = 2000 but you don't know X / Y then you will never find the values of X and Y. GDP doesn't tell you anything about how the common man lives. In the US, if you increase the incomes of the top 10% of households (household income above $110.000) by 50% you can lower the incomes of the other 90% by 15% and still have GDP growth!
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        Dec 12 2012: So you are hung up on the inequality of it all? There always has been and always will be inequality. It doesn't matter, what matters is income mobility. What matters is that they have the chance to improve themselves.

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