This is Bad Economics, Mr. Issac

What is the similarity between the Finance Minister of Kerala, Mr. Thomas Issac and I? - We both did our graduation in Economics from University of Kerala.

What are the differences between him and I? – Firstly, I am still only a student of Economics, while he is an expert Economist with years of teaching and research experience in the subject. Secondly, despite being an Economics graduate I pursued another stream and did my post graduation in management from University of Kerala, where as he did his higher studies in Economics from the JNU. Thirdly, I know that an increase in bus fare is not the right option to reduce the losses that KSRTC face, but he doesn’t know.

If you are someone who travels a lot in Indian railways, like me, you will have definitely noticed that after the bus fare hike in Kerala, there has been an unusual increase in the number of people travelling by train. This is because the cost incurred on travelling by bus is much higher than the cost on train travel. For example, if you want to travel from Kozhikode to Thiruvananthapuram in a KSRTC bus, then you have to give a fare of Rs.271, whereas it is only Rs.100 in a train. To understand that travelling by train is a more sensible option than using the KSRTC service, you don’t need any Economics knowledge, but only need a very little economic common sense.

The government says that the hike in the bus fares is to accommodate the increase in fuel prices and it is the only way I which they can reduce the burden on KSRTC. But with the increase in bus fare the number of people using the service got reduced, but the number of service remains the same. With this there will be a decline in the revenue, but the expenditure will remain the same resulting in an increased loss.

Now, what is our eminent economist-Finance Minister doing? Has he forgot his basics in Economics, or is he feigning blind and deaf to this situation, or is it so that he has no say in this decision taken by the KSRTC and it’s Minister with the acknowledgement of the Cabinet?

The increase in bus fares is helping only the Indian railways, whose income is going to increase manifold with this decision of the Kerala government. What KSRTC has to do is to decrease the bus fare so that there is at least one incentive for the travellers to use its service – reduced fare. Otherwise why should a common traveller use the service of KSRTC, what incentive he or she has to use it? Is there any great comfort in travelling in any of the debilitated KSRTC buses, especially through the pathetic roads of Kerala or is there any guarantee on the punctuality of the bus service?

The economics behind the logical option of reduced bus fares to increase the profitability of KSRTC is pretty simple. With a decrease in bus fares, more number of people would use the KSRTC service and with that there would be economies of scale for each individual bus service. In the long run, the average cost of operation for each individual service will get reduced, which in turn will add up to the reduced cost of operation of the entire KSRTC bus fleet. So there is the double advantage of increased revenue from increased number of travellers and reduced long run average cost (LRAC) of operation or reduced expenditure. Increase in revenue and decrease in expenditure, certainly means increased profit or reduction in loss.

The only way out for the KSRTC to reduce their loss is by a reduction in the fares and by increasing the number of travellers. It would also be a big relief for the large number of people who have no other option but to depend on the bus services of KSRTC for their travel. The earlier Mr. Thomas Issac recognise this simple idea, the better for KSRTC and for all travellers, like me, who expect to travel in a train with reduced rush and some minimum level of comfort.

An Ordinary Indian’s Take on the Indo-US Nuclear Deal

For an ordinary Indian, absolutely oblivious of the intricacies of nuclear energy and national foreign policy, the Indo-US nuclear deal is just another issue concocted by political parties to impose their supremacy on their ideological rivals and to earn some mean political brownie points. The deal is signed or not signed, his economic dilemma caused by inflation, weak monsoon and low agricultural production would remain the same. But at the same time, this deal has a bearing on his future, as it has some implications on the energy security and sovereignty of this nation where his children and grandchildren have to live even after he become a deceased soul.

It is a widely recognized view that the ultimate aim of any political party is to win elections and to acquire power. Helping the poor and the needy and envisaging the economic growth and development of the country etc. are mere pretexts with which they try to allure the common man to vote for him in a democracy. The arguments and disputes between the political parties in India over the 123 agreement and the nuclear deal is yet another example that shows how they use cheap political manoeuvres and place ideological barriers to feign incognisance for a need for effective discussions on an issue in the national interest. When India is going through such a crucial phase of its evolution as a global power, the political parties are fighting with each other on trivial ideological elements and personal egos.

It seems that the Congress Party, particularly, Prime Minister Manmohan Singh, is rather obsessed with the commitment he had made to the US President on signing the nuclear deal. The Prime Minister was quite reluctant to go to the G8 Summit at Japan and meet Mr.Bush without a real breakthrough in the nuclear deal as he had given a commitment to the US President about finalising the deal. But such reluctance from the Prime Minister had been quite childish. Everyone knows that, in a democracy it is not possible to make a strategic decision without making a consensus among the majority. So if he had given some word to the US President without pondering about how democracy works in India, it is only naïve of him to do so. Again I believe that the Congress government has no legitimacy to move forward with the nuclear deal as it has only the support of a minority in the Parliament. After the cessation of left’s support to the government, it is trying to get enough members support for the continuation of the government. Though the Congress party might find the bare minimum of 272 members’ support to continue in the government, ethically speaking, such low level of numbers shouldn’t be enough for moving forward with such a strategic decision.

The University of Edinburgh educated CPI (M) General Secretary, Prakash Karat is, without doubt, a man of conviction. He believes, by virtue of his strong sense of anti-imperialism, that the nuclear deal is an attempt by the United States to engage India in the strategic embrace of that country in a bid to expand their military presence. He knows that the US wants to shift the geopolitical balance towards its favour by roping in India. So the CPI (M), with other left parties viz. CPI, RSP and Forward Bloc is quite adamant that it won’t allow the nuclear deal to move forward. But even after their resolute resistance, the Congress party and its UPA allies have taken the nuclear deal to the IAEA. Annoyed by such a move the left parties have withdrawn their support to the government with the complaint that UPA is not following the Common Minimum Programme or the assurance given to them on the nuclear deal. Now the left parties shouldn’t have anything to complain as they have enjoyed the fruits of the UPA rule like no other political party in India did. They grabbed the credit for all pro-people policies of the UPA government by claiming that it was their unrelenting pressure that had made the government to take such policies. When the government took some policy decisions that were against the will of the people, like the petrol price rise, the left parties asserted that the government had taken the decision without consulting them. Thus without any political price, they enjoyed a lot of acclaim from the people. Considering this aspect the left should be happy about what they are having right now at their hands.

If about the main opposition party, the BJP, they have no ideological differences on the nuclear deal with the government. They are only opposing it for the sake of opposition, as what we Indians are used to in our democratic set up. It was the BJP who started aligning India’s foreign policy towards that of the United States and to their credit they are not contradicting it even now. But they say that they would re-negotiate the deal if they come to power after the elections. Also they are pretending to be that “utopian” political party by saying that, if they were in power they would have placed the nuclear issue in the backburner and would have given more importance to taming inflation and other pro people policies that would benefit the ‘aam aadmi.’

When it is about doing frivolous and comical deeds, our Kerala government led by the CPI (M) is never out of innovative “ideas.” In the same way that our Chief Minister VS and Minister Sudhakaran make outrageously farcical and absurd comments, the LDF had adopted a resolution against the Indo-US nuclear deal in the Kerala legislature, as if there are no other issues in the state that warrant a discussion in the legislature. To understand that it was just an act by the government to avoid facing the opposition UDF on the embarrassing situation of the hike in bus fares needs no level of immense intelligence. Please, someone save us from this idiotic government that is insensitive to the problems of the state.

And now, if about the pros and cons of the nuclear deal, I must confess that I am no expert. But I have real faith in the scientific community of our country that have negotiated the deal with the Americans. There are no reasons to doubt their excellence, acumen or patriotism and hence I presume that the nuclear deal that they had negotiated would be a beneficial one for our country. At the same time I strongly believe that the UPA government led by the Congress party has no ethical right to move forward with this deal as it just don’t have the enough numbers in the parliament that is needed to carry forward the epic deal which has several implications on our future – your future, my future and our great nation’s future.