Lord Ganesha: Why INR is over-valued in relation to Renminbi using wage rates and how that destroys jobs in India.

The basic problem is that because Modi ji kept the INR over valued to the $, it became cheaper to make a Ganesh idol 4 puja & ship it to Mumbai rather than have the same thing made at Urnoli, in Uran District,a village some 30 km from Mumbai wiping out artisans of generations.

 

 

he village in Urnoli has made these idols 4 generations. It is located by a backwater Channel to Mumbai harbour, home to lots of clay & free water. The idols are made by hand by families. They are dried in the sun & painted by hand. Used once, they have no further value.

So you see my case? Clay is free, so is water & sunshine. Colouring paints & wooden scafolding are the only raw material which costs less than 5% of sale value. The idols are transported in mini-tempos at night to Mumbai. The only major cost is labour. So …

… we have a village, 30 km from Mumbai, unable to competitively sell a low tech product requiring little more than skilled labour to make against imports from China?

How is that even THINKABLE? Yet it is true across a swathe of industries. What economic factor accounts 4 this?
The example implies manufacturers in China are virtually using slave labour at slave wages in order to be able to compete with labour in Urnoli. Or that the INR is so highly overvalued in relation to the Renminbi, that to workers in Urnoli, Chinese labour is cheaper by that much.

Note there is no slave labour in China. And here we are directly comparing wages in China with wages in India. Now since wages in India are cheaper, the only thing that makes Urnoli workers uncompetitive in India’s over-valued INR or dysfunctional exchange rate policies.

The problem predates Modi ji’s 5 years. But the exchange rate problem was exacerbated by Modi ji’s penchant for strong INR. He had to retreat in the face of an explosive rise in crude but the bias continues.

Now there are a army of sarkari economists & others there who will point REER to me. All I say to them is REER itself is bunkum. Firstly despite REER we have hair-cut devaluation every decade or so ranging from 15 to 20%. If REER worked, these devaluations would be unnecessary

Second, in the Urnoli idol case we are directly comparing Chinese & Indian wages. 4 all practical purposes, there are no other costs involved except transportation. 30km in one case, 3000 km in the other. So how does China beat India in Mumbai?

You can go to Urnoli’s villages 2 ways. Firstly via JNPT by ferry/car. Or you can turn off from the Goa Mumbai highway after Pen going towards Mumbai. You can’t miss the turn now that it has flyovers etc. The place is beautiful 4 bird lovers. Verify & tell me how this works.

That is the tragedy of our Sarkari economists. They dare not go beyond sarkars models to apply their trade. They don’t ask stupid questions like me b/c they can’t afford look stupid.

As you can see from the map [load it into your Google Earth] the clay & water are both abundant & free & there villages I speak of are on the banks of the channels. The place is home to millions of sea birds.