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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 13 2012: Hi Yogesh, some thoughts. First, three points that would need to be proven in your argument: (1) that reduced "developed country demand" would lead to lower (wholesale) energy prices, and (2) that lower energy prices would actually reach the average Indian citizen. That is, is there proof that end-user electricity or fuel prices will be lower?

    3) consider the notion that reduced "developed country demand' would actually lead to reduced (discretionary and non-discretionary) spending in India. In which case, what would be the net economic impact of reduced spending on those who are in the agricultural sector and/or lower levels of personal income?

    Finally, I believe that economic opportunity (or mobility as someone else mentioned) is also needed to reduce the income gap. If a farmer saves $1 per month but cannot find a reasonable investment for it, then it is essentially like hiding that money under the mattress and getting no return. (Internal rates of return and all that.) And here is where governments can be very influential, in providing investment opportunities for low-income folks (such as education, etc.). Highly recommend "Why Nations Fail" as an interesting high-level perspective on this matter. Hope this helps.

    PS fully agree that the world could do with a lot less consumption and a lot more investment in "production / growth" technologies, renewables included.
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      Dec 13 2012: Hello,

      Everytime the price of oil goes up, the government tends to put that load on the citizens partially. Currently they give subsidies on diesel, lpg, etc. So basically they reduce the subsidy when oil prices go up. When economic crisis kicked in, the oil prices went down and the prices of diesel, petrol were reduced..So basically the government did transfer the benefits to the people. Reducing prices in India has become more a political move than reality, so my example above is debatable.

      Together with decrease in energy costs, if organic farming (currently an uproar in India) is also implemented, the farmers would spend much less on fertilizers and energy. There are many government initiatives like cheap life insurances (with returns), micro financing, waiving off interests in drought season, etc to help the farmers. But I agree that education is the only way out in this economically relied world.

      But all this debate started because, i think to reduce emissions, we need to slow down in using fossil fuels, and how will this slow down happen and the approach to slow it down.
      This slow down will have implications on developing countries and this is what i am trying to understand.

      I have written few short blogs where you can understand where are these questions coming from and what i wish to achieve.
      http://yogeshpgupta.wordpress.com/

      Thanks a lot!

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