“…. It is only through indebting their future and eroding their past savings that Punjabis are making their present prosperous….”
The title of the article may take many by surprise. What prosperity am I talking about? Isn’t Punjab the state that is riddled with financial crises like unsustainable debt, unemployment, lack of industry etc.? Isn’t Punjab’s historical growth engine ‘agriculture’ in recession? Isn’t Punjab’s future bleak as its youth is largely addicted to drugs, its educational infrastructure has collapsed and is being replaced by more expensive educational institutes providing inferior quality of education if at all. Then how come I see any prosperity in Punjab and even try to explain where it is coming from?
Well, I was in Punjab (mainly in Bathinda and my village Behman Diwana) this November; my only visit in last 2 years. The first thing that you immediately realise is that everything in Punjab now is very expensive as compared to what it was 2 years back. This includes everything ranging from general groceries through vehicles to houses. [It was quite an experience to get a firsthand feel about inflation that has been a talking point in India for last couple of years]. But what surprised me was that people are still able to spend money. There is no sense of hopelessness, depression or anger associated with these price rises (except for increase in fuel prices. But then again, fuel prices are a touchy issue in any season). People are still able to live their lives as before.
The second point to notice was the sudden increase in traffic. There are ten times more traffic signals in Bathinda; and not without a reason. The number of cars has increased manifold; in spite of increasing oil prices. Same was the picture in the villages. There are more cars and motorcycles now than ever before.
If people’s ability to buy things at high prices and buy expensive vehicles is any indicator of prosperity, then Punjab seems to be a state without problems. But being someone who does not take things on face value, I had to introspect about this hidden channel of people’s prosperity (or ability to spend if you find the word ‘prosperity’ uncomfortable).
After talking to friends and relatives and putting some thought into it, the answer was clear to me. Today, a typical Punjai family is doing following things to buy more things and at higher prices:
– They are diluting their savings to increase their purchasing power
– They are adding less to their savings each month
– They are taking loans to fund their ‘wants’
There is no sign of increased productivity, efficiency or increase in income levels to counter balance the inflation. It is only through indebting their future and eroding their past savings that Punjabis are making their present prosperous. Unfortunately it is quite a scary proposition for a state to get into; especially when the world around us is getting more and more financially unstable.
Being in debt and not having enough savings is a recipe for disaster. What has taken decades to become visible in American economy may come as a swift heart attack to a small state like Punjab (high debt levels – both government and public, unemployment, recession) Combination of high debt and low savings is like having AIDS. You lose your ability to fight back any health crisis. What Punjabis are doing is that they are making themselves very vulnerable. It is getting into something that it does not have to. The world is getting ready for some fundamental changes in the way financial systems, governments and economies in general operate (moving towards less debt and more accountable government borrowing). Unfortunately Punjab is going away from these good habits.
But I am not at all saying that people are behaving irresponsibly. After all this is what they have learned from their past experiences. Farming on an acre of land is a lot less attractive than selling to for 10-30 Lakhs, paying off the debts that one incurred through farming, spending rest of the money to buy small piece of commercial property somewhere else and may be also buy a new eye-catching vehicle on small monthly installments (with liquid money in hand a lot can look affordable and necessary to have).
Spending more money is the new in-thing. This is what the governments and corporates promote. Success in new India is all about having more purchasing power. So far this mantra has worked in the west as they had rest of the world to imperialise through their imbalanced and extortionist foreign policies. But this can never work for Punjab or for any Indian state for that matter.
Having said all this I will also confess that savings alone is not a solution that could have saved Punjab from the disaster that it is heading for. Savings could have only bought us some more time to improve the fundamentals of our economy like education, industry, infrastructure and governance. But without adequate savings, increasing personal and government debts and a clueless government in place we are fast racing towards a situation like in Greece. People may come out of this crisis by going back to the wisdom of our forefathers (that is to save for a rainy day) but not without getting humiliated for jeopardising future for a few good moments that they think they are having these days.