US & India : Long Term Trade & Economic Partnership

PunchTantra Tuesday, July 18, 2017

United States and India have carried a supportive, prosperous and fruitful relationship over the years on numerous socio-political and economic occasions, people of both the nations look forward to each others with mutual trust and regard to their deep rooted values.
When we try to find out the roots of the origins of trade between the two vast regions separated by a large distance, it often appears difficult to pin point to a particular time when actually the trade and cultural ties between the two nations intervened to take up a substantial form. The historic addresses and enlightening speeches of Swami Vivekananda in the year 1893 in America was one of the most noted and remembered instances of the past where the exchange of ideas and values took place. At that point of time America was going through Andrew Carnegie and John D Rockfeller era of industrialization and development that included extensive railroad network and infrastructural construction along with many other scientific discoveries. India at that point of time was going through its own struggles and entrepreneurship exploration of Jamsetji Tata.

During 1890 to 1914 the monetary policies across the economies around the world were tied to Gold Standard with constant shifts and arguments over finding the right method. 
This can be rightfully considered as the problem of economics itself, as nations opposing to monetary policy of others were constantly fighting to find a global standard. Today, in modern times everyone is aware of the importance of having right monetary policies to sustain the prosperous livelihood of businesses and people and is considered among the major factor that determines the progress and growth of a nation.
It’s the right moment for both US and India to leverage mutual benefits from each other’s capabilities.

As of now, India is having a population nearing 1.3 billion, an enormous consumer market with many people still living under circumstances well below the standards that can be considered as good for overall progress of not just a nation but for the whole world. Considering the overall population of the world nearing 7 billion and comparing it with the share of India’s population and where it will be in next 20 years. A large section of society requires efforts and some wonder to work and generate what can be called as an advancing growth of human progress towards a better world. The buying power of people just based upon their basic needs is highly untapped as a vast majority of people don’t have enough money to fulfill their basic needs and facilities like good education, health care, hygiene. Other factors that constitutes for overall good living conditions are still far from what it should be considering the bright minds and individuals that originated here. India is a vast consumer market with its overall potential still not effectively utilized and some parts of resources completely unutilized.
Being a region where agriculture has always flourished, keeping the scope of improvements in food processing & storage management related concerns aside for a while; the Indian nation can still sufficiently feed its people and provide food for many other parts of the world. But when people don’t buy enough or does not have sufficient money to purchase the goods and services offered by various businesses there will be less selling or the goods and services would sell at a lower price due to an apparent decline in the demand.

One such case was witnessed very recently with removal of nearly 75% old currency with completely new bank notes issued by Reserve Bank of India with Government backing it in hopes of curbing black money and bringing accountability to the system. (while the conditioned long term benefits would depend upon what happens next, the immediate resultant was decline in GDP due to factors affecting the domestic consumption. )

Otherwise also, with a massive majority of the population still living below the good standards of living and without enough money to spend along with inefficient credit system for new ideas. Although the costs of production and manufacturing will still continue to rise along with better parts of the world, eventually the businesses would face the strain to maintain effective profitability. If this is not corrected soon, it could result in workers and employed people not getting their proper due rewards and appreciation.

The Real Concern :

The majority of labor and the working class are already under paid and over worked.  Wages are still far below what should be needed to sustain good living.
Wages of different class of skilled and unskilled, rural and urban workers, and employed people range from $175-$800 monthly.
While for the high-skilled urban jobs range from $500-$1200 monthly.
The global standards of top paying nations range from $800-$1400, and $1200-$3200 for highly skilled jobs.
There is a huge gap and definitely something needs to be done. 

 With a major portion of population of India under the age group of 15-35 there cannot be a better time to implement much needed boosting measures for a better future. It appears there is a need to find a solution that can uplift the lowest sections of the society and in-turn return benefits for businesses by increased purchasing and returning profits. This is the same condition throughout the sub continent with other neighboring countries in similar or worst condition, the future potential of nearly 2 billion people cannot be denied and it further signifies the need for a long term solution.
US is going through its own growth stagnation after nearly a century of advancement, businesses are looking to expand to newer market areas but are facing constant troubles from regulation that operates in this region. Some of the major exports are technological advancements relating to science, information technology, space and energy, along with leading the way for overall improvement in other areas of life that includes security, health and economic sustainability of individuals and businesses. Undeniably, another one of the major US export has been Hollywood and its futuristic storytelling. The year 2016 has been a roller costar ride with presidential election and global slowdown witnessed across all sectors with media & entertainment among the most affected. The Indian subcontinent is one of the major attractions with vast number of people speaking in a common language. If we consider going ahead now and making a region get accustomed to new language it would take more than two decades to see any reasonable effect.

Nowadays, unlike in previous century almost all the nations realize the importance of being together and having sustainable policies with due considerations to global impact and development. It’s really considered positive for nations to inform other friendly nations about their various policies and joining hands for mutual progress.
So the questions that arises now is how can such vast nations United States and India, can find economic solutions to generate mutual benefits and rewards for everyone with a long term growth and prosperity.

Do we need a monetary policy or a currency re-evaluation for a fixed period of time, by tying both Dollar & Rupee in a balanced way for the mutual benefits that both the nations can leverage through each other’s potential and requirements? The answer is, yes!


Currently one Dollar is valued at 67 Rupees. Considering a 20 years of revaluation. For next, 2 years (2017-18) one dollar should be appreciated to 77 INR.
 Then again a steady rise for next 3 years (2019-21) to 85.
A further steady rise for next 5 years (2022-27) to 90. And in a similar way, after a complete decade of rise, Rupee should be steadily appreciated to bring it to a value of each dollar worth 70 rupees for the next decade (2028-37).
(There could be more appreciation of rupee in later years, but that approximation can only be made later after studying the trends for next few years.)

This kind of economic adjustment needs to be compensated with changes in domestic strategies. There are both pros & cons that will come into effect with such a change; imported goods from America will cost more in India, there will be corresponding changes in current account deficits, it will load the Indian balance sheets with furthermore increased valuations of imports. That comprehends to Indian consumer paying more for each and every imported goods & services in terms of rupees in domestic market.
 “This let alone cannot possibly help Indian consumers and people in any way.” Especially when consumers are poor with lack of purchasing power. So, the question now arises is how is this kind of economic adjustment going to help everyone prosper? One way is to control inflation that may in-turn increase the value of the money that consumers and manufacturers already have, but again this alone cannot balance or compensate for the humongous changes in the exchange rates. Although the Indian exports would soar and return attractive profits. American businesses would profit, as the businesses would be spending less on manufacturing and imports.
But when we come to think of less-wealthy and small scale Indian manufactures they would be strained beyond reasonability and in fact situation be worsened.

A nation prospers economically when the common people have enough to buy. That in turn returns benefits for businesses and makes it fair for everyone.
A more effective way is to print money and let it float to the markets. This method is generally disregarded by economists. And even if it happens, still the consumers and common people will not see the better days soon and would lag behind the riches for ages.

 But here’s the rare case scenario that can work wonders for everyone: 
Something that has never been done before and would require the execution of the task at a scale almost unimaginable. That is by sending the newly printed fresh currency notes straight to the so called bottom of the pyramid, while letting other factors take its natural progression.

Some of the major questions that will arise here are:
Who needs the most or who should get how much?
What are the possible ways of dispensing newly printed cash to the accounts of people?
What is the proper way of distribution without causing any imbalance to the natural progression of economic prosperity?
Measures like overall increase of the wages of workers and labors, including availability of resources and opportunities especially for those who may lead others in the future with new ideas of innovation and entrepreneurship. Generally, a well known fact says that even if graphs like GDP progress doesn’t show a steep rise, or other conventional factors that may define progress, if the people have a good standard of living with availability of basic amenities and enough money to fulfill their basic necessities, a country or nation would still be called as prosperous with greater possibilities of improvement. The worst condition is when people are poor and when people don’t have basic facilities that constitutes for a good living. That’s the reason why the developed nations with weak graphs can afford to help others, while others in spite of those strong graphs that conventionally define the progress find it difficult to support themselves.

India has huge population with a very small fraction that can be called as rich, a huge middle income group looking for improvements and opportunities, and a massive number of poor people without anything who are losing hope day by day.
A massive lowest section of people with monthly house-hold income of less than $400, or individuals with per capita monthly income of less than $200, hereby calling it as Section A with highest priority needs the most. There are roughly 700 Million people in this section. To compensate for bringing a balance as every individual is a buyer in some way or the other way, an amount of nearly $800 yearly needs to given to every individual, that is a sum of $200 can be dispensed quarterly four times a year.
Every individual? Yes! 
Because then only it can be equally distributed and otherwise also it is extremely difficult to make a per-family based payment.
 The two points that holds importance is what about the children under age group of 17 and what are the means of ways to distribute such a large sum in a fair way to everyone. A digital India push is relief in a way as the distribution can take place electronically through bank accounts, Aadhar IDs: instead of cash disposal that can cause hindrance in accountability. Nearly a billion people have registered on UID – Aadhar and very soon more number of the bank accounts will be linked to individual ids. 
With other technological advancements where even the mobile numbers can be utilized to receive and transfer payments will furthermore make it easier for distribution.
Next Section B, individuals with per-capita monthly income between $200 and $800, or families with average household monthly income between $400 and $1200. Nearly 350 Million people are under this section. A sum of $700 should be given annually.
Section C, people and families with per-capita monthly income above $1200. (Nearly 200m people) An amount of $500 should be given to people in this section annually.

Dependent children are covered in this. However there should be something like a Fixed Deposit scheme that can explored, with better access to scholarships and financing of budding projects and initiatives that any child across the nation makes efforts for whether it’s scientific, research or literary.

Reserve Bank Of India having taken into its account the records of progress for many decades should be having most important decision making powers in the initiative.
Reserve Bank Of India will be printing nearly 1 Trillion Dollar more!
The considered term for the initiative and more revisions will be further explored.

How much will be the corresponding effects on inflation & deflation is secondary considering the actual state of people in India with what has happened in last 50 years, this compensation is minute.
This new income to the people of India is like a boost that in-turn flows back to the businesses.

Both the nations US & India should further increase the trade by giving better access to their own markets. As the exchange price is adjusted there should be less tax levied on US imports in India.
The US based companies both small & large should be given easy access to Indian resources and consumer market.
The advancing technology should be welcomed in generous way, as companies should be allowed to setup their businesses in India through a faster and easy medium.
Another important area of work is Patents, Copyright & IP protection.
There should be more co-production based projects that should be initiated between both the nations. 
Films and media are bridge between cultures, and storytellers make ways for generations, hence artists and businesses from both the nations should explore new ways of working together.


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