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Lesson from Venezuela

If people in a country experience unprecedented hardships, such that in just one year the average weight of 75 per cent citizens goes down by 8.

Lesson from Venezuela

Shoppers check the prices in Caracas, Venezuela. Reuters



Ashwani Mahajan 

PGDAV College, University of Delhi

If people in a country experience unprecedented hardships, such that in just one year the average weight of 75 per cent citizens goes down by 8.7 kg (2016), if the price level increases by 4000 per cent in just one year (2017), the value of currency goes down to such an extent that purchasing 1kg of food takes a bagful of currency, when murder rate goes up to 100 per lakh, it is really worrisome. The country is the onetime prosperous Venezuela. The conditions there have reached to a civil war. And this situation has arisen in only in the last four years. 

Venezuela, an oil-rich country, founder-member of OPEC (Organisation of Petroleum Exporting Countries), a country with per capita income as high as $17,700 in 2013, has been undergoing a deep crisis for the last four years. This crisis has started affecting the whole world due to reduced supply of crude oil. Though President Nicolas Maduro has again captured power in Venezuela, it is believed that the elections were not fair or free. Venezuela remains in a shambles due to agitations, lack of governance and extreme shortage of daily needs, including food.

The whole world is facing the heat of rising crude prices due to a fall in Venezuelan oil production. In the process, Venezuelan GDP is declining. The economic sanctions proposed by the USA are multiplying the woes of Venezuela and the world. 

In the last four years, inflation has crossed all limits in Venezuela. The rate of inflation was 69 per cent in 2014, 181 per cent in 2015, 800 per cent in 2016 and 4000 per cent in 2017. People have to shed more than one lakh Venezuelan currency (Bolivar) for one single US dollar. Notably, in 2013 it was 6.3 Bolivar per dollar. 

It is notable that 80 per cent of GDP in Venezuela comes from petroleum. The share of agriculture in GDP is 3 per cent and industry 17 per cent. Venezuela used to be known for its electronic, automobiles and beverages. 

Since 2003, its food requirements have increased by 95 per cent by 2012. However, its domestic production was very meagre. Given its huge oil proceeds, it could manage to fulfill its food and other requirements. However, excessive dependence on petroleum has been its biggest weakness. In the 1980s also, the Venezuelan economy had suffered due to the oil glut (recession). Venezuela experienced worst banking crisis in 1996. However, uptrend in oil prices post 2001 gave it a massive reprieve. Economy improved, but politics spoiled the situation in the name of improving the conditions of poor, adopting socialist measures; which proved to be disastrous for the economy. Because of shortage of food and other essential products, standard of living has been hit. Declining oil price after 2013 have multiplied their woes. GDP started contracting while living standards were going down and crimes were going up. 

Though oil prices have started rising again, the US has proposed economic sanctions against Venezuela. It would be difficult for Venezuela to sell its crude oil to the rest of the world. It is notable that India which has been procuring a major part of its oil from Iran and Venezuela, will find it difficult to continue with the same, given economic sanctions imposed by US on these two countries. 

Lessons for India 

Though conditions in Venezuela are different as 80 per cent of its GDP comes from crude exports and ill-conceived economic policies adopted by its government are responsible for mess, it gives lessons. 

In India, some economists have suggested that there is not need to bother much about agriculture, as food can be imported.  But, as seen, Venezuelans excessively depended upon government subsidy and ration, because of shortage of food. Today, India is almost self-sufficient in food, a merit which it must maintain. People must be empowered by raising their income through gainful employment, so that they are not dependent on the government, either for employment or for food. Any shortfall and mismanagement of the public exchequer may cause hardships for the citizens, as Venezuelans are facing today. 

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