Saturday, October 31, 2009

Economics lesson from the local kirana storewallah

High inflation has been the order of the day in our country since past few years. The other day I went to my local grocery store to buy some rice. The grocery store by the way has a very funny name - Jai Gurudev Chana Bhandar. :) He offered few variety and I narrowed down to the one being sold at 44 Rs/kg. (almost 1$/kg)

I felt like chatting with him for a while and got to learn that the owner of the kirana store came to Mumbai in early 80s from Uttar Pradesh. One of two states from where maximum immigrants come to Mumbai on account of low economic growth and also poor quality of life that the largest state offers to its people. I told that person that 'yeh bahut mehenga hai' (this is really expensive). He said there is no way that the price would come down.

On poking a bit further about the basis of his assertive statement, he started explaining his understanding of economics. He mentioned that when he came to do business in the city, the cost of toor dal (a popular variety of pulses) was Rs 3/kg and since then the price has always risen and today its being sold at 90Rs/kg. He said that people are fools to say that its because of Congress that the price is high. Using an interesting swear word he states that irrespective of which government comes, the price just can't be low for the simple reason that the interest in farming as a means of occupation is losing popularityin the villages now. When they go home every year, they get to meet villagers who want to see cities, work there and ensure that their kids get a good education.

When there are no producers, prices are naturally going to shoot up. There is nothing to get surprised about that. That was the crux of that few minute conversation.

The interesting part was that, this person has not completed his formal schooling and in his conversation, you can get a light understanding of a basic principle of economics, trend towards urbanization and the limitation of public policy in certain food prices.

Though there was nothing to bank upon but its really nice to see how each individual despite his limited formal education, tries to develop some understanding of the reason why things happen in a certain way.

I found it really interesting. This also points to the fact that we can never take for granted the opinion of the common man on political matters. No wonder his vote wins at the end of every election.

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