Sunday, August 9, 2009

Prices of goods always go up, right? Wrong !

In India, we take for granted that price change is always in one direction . Up. Ever up. Higher and still higher. That is one thing which defies gravity, we joke. But there are exceptions. Electronics. Consumable durables. Have a glimpse of my observations made out of my personal experience of consumption.
*In January 1998, I had bought a Philips colour TV. It was a multimedia model. That meant that you could use it not only as a TV but also as a computer monitor, with some accessories. The price was Rs.22000.- That was a lot of money 11 years ago. Though I could have used it as a second computer monitor too, I used it mainly as a TV. I can not now explain why I paid for a feature which I did not use. Too late. But even the corresponding non-multimedia model of Philips used to cost close to Rs.16000.- Since the 11-year old unit started showing some fatigue in terms of fading colours ( the red became increasingly yellow), I decided to sell it and buy a new colour TV. Recently, I found a professional buyer and sold it for Rs.1500.- I bought a new colour TV of Samsung make. It cost me Rs. 7100.- A slim design ( a superior model of flat TV). Rs.7100.- today means about Rs.3500.- in 1998. So, in real terms, the colour TV price is 25% of what it was 10-12 years ago.
*In 1987, I had bought an Automatic Washing Machine. It cost me Rs.10000.- It had a dedicated chip for the automatic washing and drying cycle including heating ( heating is not a standard feature of the Automatic Washing Machines of today, except in an IFB model). It was one of the two makes available in India at that time. The unit was assembled in Faridabad, out of Japanese kits. Now the equivalent model ( IFB make ) costs Rs.17000.- Rs.17000.- of today must have been about Rs.3000 to Rs. 3200.- in 1987. So, in real terms, a washing machine costs less than one-third of what one paid for a similar machine 22 years ago.
*DVD , if I remember correctly, came to the Indian market in the second half of the nineties. May be late nineties. Till then it was VCP/VCR that dominated the market. I bought a National ( Japanese) VCR in 1989 for Rs.18000.- A VCP might have cost Rs.10000.- at that time. Iam not sure how long I used it; but after the cable TV came into being in early 90-s, one did not feel the need to use VCR or VCP for seeing any movie as the cable offered so many channels and hence enough choice of movies every day. Recently, I decided to buy a DVD. I bought a basic model of LG. I paid Rs.2200.- for it. Rs.2200.- in 2009 is the equivalent of Rs.500 to Rs.550.- of 1989. My conclusion is this. A superior technology in 2009 costs one-twentieth of what the price-tag of its more primitive predecessor in 1989 was.
*You might have other examples to brief me about. Mobile phone......PC.....Laptop.......and....and... the list could be longer than you think.
Now tell me, do prices always rise? Even if they do nominally, do they always rise in real terms? Not always. Thanks to constantly-evolving technology and free-market system. they could and they do come down in several sectors. Oh yes, also because of the Govt. of India's increasingly liberal import policy which has resulted in significant reduction of customs duties on components over the years. Let us give some credit to globalization which compelled the Indian Govt. to be market-savvy and not a tax-and-spend Socialist of the yesteryears.

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