Tuesday, December 4, 2012
Whenever I listen fund managers, they frequently use word “CONSUMPTION”. According to Equity experts, “CONSUMPTION” is a great driver to boost GDP among other boost factors to stock market.
Today, I will discuss “CONSUMPTION” & “A STRONG ECONOMY” in very simple words.
Before we consume, we “BUY”. So buying is the basic of consumption. Buying capacity comes from our income. We need to buy necessities and we buy luxuries too. More we buy from our income, we are left with less saving on hand for other needs, future goals & causalities. If we don’t have money on hand to buy our desires, we opt to “Borrow”. To feed for all our spending, we borrow more and it contributes to higher the growth of “Banking Industry”. But a borrower enters in to a long term repaying contract (EMI). What his earning of today and tomorrow, he has to pay for the previous borrowings. Not in all cases but excessive blind spending may lead one to “Debt Trap”.
All traders, Manufacturers and Government (In light words “The Game Gurus”) too wish that people spend more money. That is the real success Mantra. Additional help is received by Celebrities through their endorsement to products and Large Events (Like Sports Events, TV Shows etc.). This helps all three Game Gurus to give people a sip of fun for buying, people take the sip and spend very unconsciously.
Let us go to the word “Consumption” once again. If consumption is for necessities like health or education, it improves standard of living & creates basics of growth of individual and society. But if the consumption is for lifestyle, for fashion, entertainment & vanishing products, the buyer left with nothing on hand. Such consumption leads to more trapping situation.
A suggestion. Please start observing people around you. Those who are not aware about spending, they are making their own road of disaster, because once they start living in higher life style, later they will not be able to compromise. This will lead them to an imaginary feeling, “I am special. I need different superior environment (in Food, People, Clothes, Brands etc.) around me”. By living in such environment, one further goes deeper into this false idea and in case of any unforeseen event, he collapses.
This is the short story of unaware consumption.
Now, let us look to GDP and then “A strong Economy”.
When consumption grows, the traders, manufacturers, media, celebrities & Government earns, whereas the unaware spender left with less savings.
When one buys for a product it is boost to a trade, so GDP grows & Government is happy with the figures, corporate profit grows & Sensex naturally grows.
However, the money spent for a product should be manufactured in our country. It gives employment to mass, growth of Manufacturing activity, new employment generated due to economic activities, Higher Tax revenue to government etc. But if the money spent for imported products (Foreign country products), we as a country, looses as our currency (Rupee) becomes weak, low employment generation & low tax revenue to government. Other countries are exporting their product so they earn, they become stronger at our cost, all this due to unaware spending of people. So a strong Economy is a country which exports more & imports wisely.
A strong country is result of a strong economy. This is possible only with strong SPIRIT of the people of the country… No arguments, only one Oath… Our country, Our Economy, Our Products, Our currency and everything ours…..