21st April

Ouch!

The article talks about the realization that has come to the Indian consumers about the ill effects of credit cards as their numbers decline in the last fiscal by about 28 lakhs while on the same time the number of debit cards issued increased exponentially to 2.37 crore. 

In the times of economic slowdown, the decrease in the number of outstanding credit cards is good news. Largely responsible for irresponsible consumerism in the good times when salaries increased exponentially and people started buying things beyond their immediate reach, credit cards also brought, along with it, a huge pile of overdues. Card companies also didn’t worry much since they enjoyed the interest rates being charged to consumers on their overdues. But now both, banks and consumers, are all left with huge pile of overdues. While the number of outstanding credit cards decreased from 2.83 crores in April 2008 to 2.55 crores in March 2009, payments made through credit cards have also gone down. At the same time, the number of debit cards issued this fiscal is huge 2.37 crores. This is a welcome rebalancing.

The slowdown has forced us to go to our ancestors’ philosophy of saving something for the rainy day, something alien to US consumers and something inherent in our DNAs. Now people would see credit cards for actually what they are – huge convenience and not the escape from reality.

Sugar pricing

The article criticizes the huge amount of government intervention that goes into the pricing of sugar in India which in turn affects the demand-supply equation of the entire industry. 

Govt’s step to stop futures trading on sugar is a welcome step but it should be known that sugar crisis is not only due to futures but largely due to policymakers. Govt wants to keep retail sugar prices low but still expects sugar mills to pay high prices to sugarcane farmers. While India is second largest producer of sugar, it is also the biggest consumer. Intense government intervention forces sugar mills to go into losses because of which they are not able to pay high prices to farmers, who in turn switch to other crops creating a shortage down the line. Global sugar prices are largely dependent on the demand-supply equation in India. Sugar production this year has gone down drastically by 40% to 15 million tonnes against the consumption of 23 million tonnes. While sugarcane factories have stopped crushing sugarcane owing to lack of supply, the retail prices went up Rs.30 per kg before govt threatened to intervene and allowed duty-free import of both, refined and raw, sugar. Global prices of sugar have gone up in anticipation of huge imports from India. Sugarcane needs to be crushed as soon as possible after harvesting otherwise the sucrose content in it decreases which is not good for farmers. State governments like UP always insists in pricing the sugar at prices higher then scientifically calculated Statutory Minimum Price (SMP). 

While such actions need to be resisted, government should also provide subsidized prices of sugar only to the weaker sections of the society instead of all consumers.