Economy does not lie in sparing money, but in spending it wisely.Thomas Huxley
There are two parts in the title. Lets first discussion them one by one.
How our Economy is in danger?
With Covid-19 pandemic the economy of many countries has been brutally devastated. Leading to unemployment, inflation, less income and poverty.
In the modern setup a country is strong if it’s economy is strong.
With falling economy our country is becoming weak.
The concept of becoming Rich
There are basically two types of income
Active income and passive income.
Active Income:- means that you work and you earn. When you don’t work you don’t earn.
Passive Income:- means you earn even without working. Your money work for you and earn on your behalf. Cool! Isn’t it? Well the concept of becoming rich is based on passive income.
In a general conception Savings is a means of becoming rich. But Have a look at the economic impact that savings have on the economy at the national level.
The Economic Paradox
Economic Paradox means that what is good at micro (individual level) may not be good at macro (national level) and vice versa.
Savings are considered good at individual level. We all are inculcated with habit of saving either by way of a piggy bank or any other means. But these Saving are not good at national level.
Wondering how? Read further to know…
When you all save your income at individual level there comes a leak in the cash flow system of the country. Understand this way:- suppose you purchase some electronic device like tv, ac, refrigerator, mobile, headphones, pen drive etc. This way you Demand for electronic goods and the electronic industry produces those goods. Their production adds to the GDP (Gross Domestic Production) of the country. In layman language the more the GDP the stronger is the economy and the stronger is the country. Now when you save you don’t purchase electronic goods. The Demand for electronic goods fall. The factories will produce less of goods and GDP will fall.
The twin attack of pandemic and lockdown has severely affected the GDP of the country. Question arises what we as an individual can do to save our country.
Answer is that you need to spend your earnings. When you spend and buy goods it will lead to more consumption, more production and more GDP hence stronger economy. But in a pandemic situation isn’t it better to keep my money safe? And not to spend it?
There needs to be a way to increase cash flow in the economy without affecting saving and individual income.
Well I thought of a way. INVESTMENT.
Remember Passive income to become rich? Well it is the investment that you do that will increase your passive income and that makes you rich.
Amidst the crisis situation large investors are viewing it the best time to invest. Example- Reliance Industries has raised a record Rs 1.04 lakh crore in less than eight weeks from sale of minority stakes in its digital unit Jio Platforms to marquee investors from around the world comprising of Facebook, Silver Lake, Vista Equity Partners, General Atlantic KKR & Co Inc, Mabudala, Saudi Arab’s PIF to name a few.
Forget about large investment many peny stocks (nominal or low value share with high risk) in Indian stock exchange gave return ranging from 50% to 900% (as reported by NSE). In simple words you spend rs 1 on one share that became of rs 9 if you bought 1000 shares by investing just rs 1000 you managed to earn rs 9000 in this lockdown by doing nothing all while just staying at home.
For investment you don’t need bundle of money or a fat bank balance. Even small amount of investments done at the right place does enough good to the national economy and to your pocket.
When you will invest you will give the much needed capital to the industries. This will encourage them to do production. By investing you keep your money safe and with the additional interest income on your investment you will demand goods and increase consumption. Hence keeping up the cash flow of the economy in good order.
So keep investing and keep earning. This will help the country to grow and develope all at the same time.
All the nations around the world are going through economic problem. If we as a citizen can do something that will benefit out country then I feel it is a kind of national service that we render to our motherland
The study of economy in the current crisis situation is a tricky task even for learnt and experienced economists. Still I have tried my best to interpret the current economic scenario and devise out a way to boost up the economy.
Thanks for Reading.