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Wednesday, May 12, 2010

Addressing the problems of Rupeezone

While everyone is pondering the ways in which Eurozone is not an optimal currency area, I found myself worrying about the ways in which Rupeezone is not an optimal currency area. In the Financial Express today, I have a column: Addressing the problems of Rupeezone.

Here are interesting materials on Greece which set the stage for this:
This is an interesting demo of how economics happens today: an interleaving between journal articles, newspaper columns and blog posts.


  1. Some of the States of India are so big that there are wide ranging intra state disparities. e.g. Eastern UP,Western UP & Bundelkhand, Vidarbha,coastal parts of the coastal States and the hinterland. To a lot of people from these areas language is not a barrier,education is. Maps and signage dont matter to them either.

    Importantly, most of the 30 districts affected by maoist menace have very low literacy level which is a big barrier against migration.
    A cruicial factor that has been omitted is the information gap. There might be factories in Delhi running under-capacity for want of labour and villagers busy bribing the sarpanch for NREGS wages mutually unaware of each other.

    Migration first takes place from village to most nearest urban agglomeration and then on to Metros. Directly migrating from distant hamlets to distant city has many barriers. The lopsided development is also a fodder for political parties to oppose 'outsiders'. This makes it important to have fast growing urban centers in all backward regions of the country.

  2. I have the impression that India has more labour mobility at the extreme ends of the market and less in the middle. Highly-educated Indians can find work in states beyond their own state, thanks to their marketable skills and English language. Hence, scientists, engineers, IT programmers, and people like that enjoy a national market, with relatively few barriers.

    Similarly, the very poor who work in certain fields (such as unskilled construction, manual labor) appear to be quite mobile, either through their own efforts or through the efforts of labour contractors who connect them with jobs in distant parts of the country.

    It appears that the middle, the people with some education and skill but not very much, and who speak little or no English, face greater barriers to mobility. They are neither desperate enough as the poor to go to distant places and live in appalling slums, nor wealthy or skilled enough to be hired in better jobs with good pay and amenities far from home.

    I would be curious to see if others share this impression.

  3. Agree with @Joydeep.
    The green revolution in Punjab was built on the back of the 'Bihari' labor. If you tour Punjab now, a large proportion is Eastern UP labor. Seems Laloo's policies are keeping more people in Bihar. Alternately, look at the ire of the MNS in Mumbai. They are actually making a case of 'over immigration' from Bihar and UP into Maharashtra.

    To me, some of the 'requirements' of a Rupeezone are already there, even though unpalatable to the economists. For example, Predominantly 'cash' transactions: Take away the need for tax or other feature that are immigration friendly.

    Though, I do agree that the language barrier cause problems with migration of labor from the North to East and South, or vice versa. but most of the 'heartland' is probably covered.


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