Dr. Raghuram Rajan’s Explanation Of Rising Dosa Prices Show His Grasp Of Economics

Dosanomics in action!


At a recent event, Raghuram Rajan was quizzed about his much-acclaimed ‘Dosanomics’ to explain the economic scenario of our country. Sana Nazar, the girl who asked him the question put it this way:

I am a dosa lover and I am fascinated by your Dosanomics. You taught us to protect ourselves and you taught us that lower interest rate with a lower inflation rate is better than higher interest and inflation rates. But in real life, when it comes to the dosa, its price goes up when the the inflation rate goes up. But when the inflation rates comes down, the dosa prices don’t. What is happening to our beloved dosa, sir?

Rajan’s answer was measured and thorough. He cited the Balassa-Samuelson Effect to support his answer. He spoke about how there has been no technological advancement in preparation of Dosa. A dosa maker ‘still puts the same maavu on the tawa and spread it around’, while in a separate industry, a bank clerk can service more people using the advancement in technology. So, the wage one pays a dosa maker will always go up as he can always use his time to apply for a job in areas where productivity has gone up, he said.

Well, we’re glad that an institution as important as the RBI is under you, Mr. Rajan. Thank you for teaching us economics lessons in your own unique style.