Wednesday, December 17, 2008

The Economics of Consumer-Supplier: Indian Perspective

For the past 2 months now, that i have been following up the financial crises and it implications in the world over; the impact of the same on Indian economy is clearly evident. In the meanwhile, one thing that has been intriguing me :: who is actually suffering in this economic crises -- the consumer or the supplier. I am taking the view as these two identities are the fundamental cornerstone of the economic enterprise.
In India, the inflation is down 4 -5% over the last 2 monts from a record high, economic growth is projected at over 7%; interest rates are down due to government intravention; job losses announced and unannounced do not seem to be a big issue; Oil price (India is a big importer) are down to 40's $/barrel; Airline fuel costs are down accordingly; YET -- there is NO

  • downward revision in prices of air tickets;
  • not many discounts being offered on consumer goods;
  • fall in demand for services industry;
  • reduction in prices of house by builders.

(not an exhustive list)

Two items from the above list 1> airline ticket and 2> house prices are the ones that bring in more wonder to me. Why are they not falling??

The airlines who have been charging extra in the name of fuel surcharge had to simply reduce this component proportionately per the price reduction in fuel. Yet they don't -- leading to confirmation that this so called fuel surcharge includes items of making more margin rather than covering the cost by a pass thru to consumer. What are the consumer doing about it -Nothing. Have they stopped buying tickets - NO. Have they protested in media, directly to airlines or consumer forums - NO. Why?

On the other hand, the builders have been running after the government to take action. Lower interest rates, enhance credit facilities for loan etc - what is that the builder is offering from his pocket(profits) - NOTHING. Why are consumers not waiting - shunning high prices; complaining etc. Because the consumers have money, they are themselves party to the price rise by creating a demand - and giving opportunity to the builder (suppliers) to raise prices.

So is consumer activism (ability to know its rights and ask for them) linked to the economics of everything?

I voice my concern and will advocate it to the world. The consumer is king (without clothes) today and it needs to regain its clothes by advocating its rights.

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