Income based poverty line vs Consumption based poverty line

Even though NSSO captures consumption expenditure which used by Planning commission to determine poverty line. An alternative way of calculation of poverty line can be one based on Income of the population. But till now all committees have favoured consumption based poverty line due to following factors –

1. Huge majority of population has irregular income, most of them are in informal sector which consists of self-employed people, daily wage laborers etc. Income of this group is highly variable both temporally and spatially, while consumption pattern are comparatively much stable.
2. Even in case of regular wage earners, there are additional side incomes in many cases, which is difficult to take into account.
3. For e.g. MGNREGA provides employment for about 100 days, for rest of the time too people will earn something.
4. NSSO’s sample based surveys use a ‘reference period’ (say 30 days). They will ask households under survey about their consumption in last 30 days. This they will take a representative of general consumption of that household. This is not possible in case of income.

Brazil falls deep into recession.

Once a major economic success story, Brazil sank into recession. Its economy contracted 1.9% in the second quarter compared to the first. It was the second consecutive quarter of contraction.

Here are the major reasons why Brazil, is now in a recession:

1. Brazil's exports to China had exploded over the last decade. Now that China's economy is slowing, it needs fewer exports from Brazil. 

2. Brazil's state-run oil company, Petrobras, is in a massive corruption scandal tied to many members in Rousseff's political party. The large money-laundering scandal spans across oil, business and political leaders in the country. 

3. Prices for all of Brazil's key commodities -- oil, sugar, coffee, metals -- have tanked. Commodities are the engine behind Brazil's economy and they've lost value fast.

The recession comes as Brazilians are holding mass calling for Roussef's impeachment. Although corruption isn't new in Brazil, the scale of the Petrobras corruption is large. Petrobras officials said earlier this year that the company lost $2 billion just in bribes.

Why isn't the USA stopping China from becoming an economic superpower?

If we analyse the situation rationally, there are two reasons for this-

1) China has something like 4.5 times America's population, so the fact that their economy is en route to exceed ours is hardly surprising. If you think that's a bad thing, you are essentially saying that 1.4 billion people should be living in poverty. What reason is there for believing that the U.S economy should always be the largest on earth?

2) What do you think the government should be doing to prevent the Chinese economy from growing? A boycott is hardly possible and a trade war would hurt us as badly as them. Investment restrictions would again just hurt us and benefit Europe and Japan.

The fact is that the American and Chinese economies are tightly linked. We should be thinking about how to benefit from China's rise (for example, selling them some scrubbers for their coal plants) instead of pointlessly trying to keep them down.

What is SAARC's impact on Indian economy?

SAARC countries share same cultural history since centuries. In the economic terms they were interdependent up to the point but colonial rulers like British, Portugese, Dutch e.t.c shares the colonies and ruled them for their benefits. After the attainment of collective independence, India remained the largest country in all terms ahead of its neighbours. Because India is somewhat peaceful and had a stable political establishment since independence. No two SAARC countries share a boundary and all of them share a boundary with India. India is strong in economic perspective than other SAARC countries so they were not of much help to India.


Pakistan : It never completed the term of 5 years for any government except the recent one. Army, terrorists, internal conflicts e.t.c. hampers the growth of pakistan in every possible way. - Not helpful at all.

Bangladesh : In 1971 India helped it liberate and still the furore continues,  with the opposition trying to establish a islamic state. - Not helpful

Srilanka : LTTE war - relations degraded. But hosting the tamilians who stayed there. - Interests of Indians ( tamils and fishermen) are involved. Have to co-operate with them for greater development of tamil regions.

Maldives, Nepal, Afghanistan : Unstable and micro economies compared to India. India helped them with grants but never the other way around.

Bhutan : Complete dependence on India. 90% of exports to India.

Because of the low economic growth of these countries their help is very less compared to the help given by India. But these nations are handful in terms of population which are potential markets for exports of India. This is the reason MODI is emphasizing of peaceful and good trade relations with neighbours. With SAARC countries led by India and helping out each other for prosperous south asia. It could turn the tables in favour of India in global arena.

Is moderate inflation good for the economy?

Definitely. Inflation is just pressure that keeps money moving through the system. To have a vibrant economy, you want money to constantly be in action rather than stagnating. Of course, too much pressure is dangerousand the same goes for inflation. 

This leads to a few advantages. The main one is that it incentivizes people who have stuff (ie assets) to go out and actually put them to use. This way more things get done, which is generally beneficial for society. This means more money circulating, more people getting paid, more businesses making revenue, more taxes... All good things.

Another advantage is in fighting against a particular sort of cognitive bias: nobody likes their wages decreased. And yet, rationally, there are times when wages should be decreased. Luckily, this bias can be fooled by keeping the nominal wages the same: as long as the number stays the same, you're happy. Even if, in real terms, the number is actually worth less year over year!

Having more assets circulating also makes things more liquid. If people are more actively buying and selling, it's probably easier to buy or sell whatever you need. This makes doing actual business easier. The main point of the economy is to move necessary things between people who need them, which is exactly what liquidity helps with.

As an interesting detour, consider real estate. Generally, there is a fixed supply of land. You can't just create more, especially in the middle of a city! This means that land is inherently deflationary. If you have a prime spot of land in the middle of a city (but not enough resources to build anything), it would be in your interest not to sell this year, since it will be worth more in the future! But since you're not using it, everyone would actually be better off if you sold it. After all, we don't want our city centers full of empty lots! I figure this is one of the reasons we have property taxes, which can counter the deflationary nature of land and make it easier to buy and sell it.

This extra kick to make people use or sell valuable land—which is beneficial for the city as a whole—plays exactly the same role as inflation in general. We want to run our economy at a reasonable utilization, putting most of our resources to work most of the time. Inflation is a nice decentralized way of making this happen.

At the same time, inflation is not without risks. In some sense, it's an implicit tax on assets. Since government bonds are denominated in currency, inflation is like an extra source of revenue. This could allow a government to levy an extra tax even if it would be opposed, rationally or not. This (rightly) worries some people. However, it does not mean we should not have any inflation! It's just something important to consider.