Nourishing the Indian Economy
A Lesson in Understanding how the Economy works
A Lesson that will help you understand how all of us are Nation Builders
To find out more read on …..
1) Let’s learn how our money reaches the economy
2) Let’s say Deepak is an officer who saves some money after meeting his expenses
3) While meeting his expenses he as a consumer nourishes the economy by creating demand which provides revenue to the companies and they pay their employees plus buy raw material etc for their production process to keep ticking
4) His savings go into the Bank as FDs
5) The Bank lends money to industry to meet their working capital needs and other steady turn around needs
6) Bank Capital is for example used to buy the fuel for a truck; when the truck finishes it’s delivery, they pay off the bank
7) Bank Capital is used to buy land and machinery which can be hypothecated to the bank
8) Hence this is called secured loans
9) Bank capital helps to keep the wheels of the economy in motion
10) Banks will normally knock at your door for their money from time to time
11) Hence Bank Money is comparatively cheap because you need to pay back systematically at regular intervals
12) Hence turn around time needs to be limited and repayment cycles honoured like EMIs
13) Now Deepak also parks some of his money in Equity Mutual Funds
14) This money through the Mutual Fund reaches companies to fund their long term needs of hiring team, Marketing Expenses, Brand Building and so on
15) Equity capital is risk capital (unsecured) as unlike plant machinery and land things like Branding Expenses cannot be hypothecated to the lender
16) But these investments build the foundation for an organisation
17) Some money Deepak parks in companies who fund to start ups ; small fledgling companies who need money for even longer duration
18) The unlisted space companies are certainly willing to pay more for the capital and provide higher returns
19) Thus the banks and other intermediaries are busy mobilising money to fund the companies or different capitalisation as well as start ups
20) This one man Deepak in his small capacity provides consumer energy to breathe life into companies, industry and economy in one hand
21) On the other hand he also provides investor energy into the economy by lending money through Banking System, Mutual Funds and Other Intermediates like Private Equity and Venture Capital to fund start-ups
22) This is like providing his blood in a blood bank that ultimately gets injected into the economy as a whole and the blood running in the veins of the Economy keeps it alive, ticking and breathing
23) Thus the industry / economy gets fuel from Deepak and after building goods and services (Value) again take Deepak’s help by selling the products to him for his consumption
24) The companies and the economy also provide employment with the power of investment money as well as profits that they make from their operations
25) Thus they provide Deepak with a job and pay Deepak his salary which he again spends every month as consumption energy and invests a part of it in the economy through intermediaries like banks, Mutual Funds and Venture Capital Companies
26) This is how many Deepaks together bring Deepak into our Economy and keep the wheels of the economy in motion
I hope this article has helped you to join the dots on the economic system
I rest my case
