RBI Governor Raghuram Rajan had his economics skills put to an unusual test during a Federal Bank even on Saturday night. One of the audience members asked him if the inflation was under control, why does dosa still cost so high? A South Indian delicacy, dosa remains the staple snack for many throughout the country and the question seemed to stem out of genuine concern. As eloquent as ever, Rajan explained the high cost of dosa and imparted an important economic lesson.
Rajan said that the technology of making dosa has not improved over the ages. It is still the same technique requiring the same man power as it always needed. Workers’ wages, on the other hand, are increasing steadily especially in states like Kerala. Hence even though inflation is in check, dosa prices remained high to compensate for higher wages. Similarly in other sectors sans any technological improvements, the prices of finished goods continue to soar despite inflation coming down.
“So, what happens is that in an economy which is growing and when there are sectors which are improving technologically while other sectors are not improving their technology, the prices for the goods manufactured by sectors, that are not improving their technology, will go up faster. You are seeing it in the case of Dosa.”