Bottled-Water Economics in Train

During MBA, there was a popular case study in the macro-economics class on how poverty is a vicious circle. The case study demonstrates on how the poor are forced to stay poor. It takes a lot of Government intervention (as regulator and financier), opportunities and luck for someone to break the shackles of poverty and come out of it. The case study demonstrates the fact through an example of calculating the rate of interest/debt pay-back someone had to pay depending on the social class. Mukesh Ambani, because of all his wealth, can get a Rs. 10 lakh loan for a petty interest rate like 10%. (going by the basic interest rate, but actually he might end up getting for a rate less than that.). For him paying this debt back, does not make much of a difference. But a road-side vendor takes a credit (in form of vegetable stock) worth Rs.300 and ends up paying Rs.700 every day. That’s a shocking rate of interest (130%) which he ends up paying because he has no collaterals or wealth.  This Is the reason poor always are forced to stay poor until the government or other institutions intervene to regulate or finance.

In my long list of train journeys, I have seen a very shocking portrayal of this fact in real life. To my surprise I never thought that this big lesson would come from a simple life example of bottled water. A month back, I was travelling in AC 2-tier. It was around 10pm in night, I finished dinner, and needed a bottle of water. When a purveyor was going around I have asked him for two bottles of water. He said he can give me one bottle. I paid him Rs. 15 (printed rate) but immediately I saw that his case has more bottles. I raised my voice and exerted my right that he should sell one more to me. He said that if he will sell more bottles to me, he will lose business. ('Opportunity cost'). I was now curious and asked him to explain. He said he is going to the general-coaches (unreserved coaches) where he will sell the bottle for Rs.30. My first reaction was of shock I wondered how he could sell it at a higher price in a lower economy class. My next reaction was of skepticism, wondering who will buy his over-priced inventory. As though he read my face over the reaction, he began to explain, in General coaches which are cheaper (which most of lower social class people prefer), there is no allocation of seat and people cling to their seats/space which they occupy whenever they get. There is a lot of competition for the seat/space and hence no one would get up from seat to buy a water bottle from en-route stations (even if they were comfortable, buying from stations is difficult, as the train stops for a few mins and sometimes these shops on platforms are not near. Sometime the stations themselves are deserted or worse there are no stations for hours together). They have no option than to depend on the purveyors and buy at the price they sell. Though this cleared my skepticism, but made me furious that this guy is cheating on a poor man. My only consolation at that time was that even the purveyor is poor and he is cheating another poor man to make his living. However it still makes my blood boil that someone buys a general-class ticket to save money but the eco-system does not let him do that. He is always looted to keep him poor.

In this context, the Rs.10 drinking water scheme started by Jayalalita in Tamil Nadu is a welcome move. Many commuters now get access to cheap drinking water at all transit points. Hats Off to you Fat Madam!!