In a session with the former RBI Governor Reghuram Rajan, a student had asked him the reason for the rising food prices. The question was when the inflation prices go up the prices of dosa goes up but when the inflation rates are lower the dosa prices are not lower.
Reghuram Rajan explained this situation by giving the audience an insight into Balassa-Samuelson effect. The idea is that the technology for making dosa has not changed. There had not been any technological improvement in this domain. But the wages for the worker has been going up. So what’s happens is in an economy which is growing, the sectors that don’t improve technologically the goods produced by those sectors will be much higher.
Why I brought this up? In a recent assignment that involved my team seeking out trends in Indian market. One of my friends brought my attention to a machine known as Dosamatic machine. This machine will help you wend out Dosas, now for those who have never heard about Dosas. It’s a dish made in India, prominently in the south Indian states of Kerala, Tamil Nadu, etc.
It is a type of pancake-crepe with a wide type of variety but that is not the point I want to talk now. What I am wondering is how dosamatic machine will affect the Indian economy once it becomes a full-fledged household item. I will have to research some more before coming to a consensus. I will post the works on it later but from a quick study it can be said that dosamatic machine will not make a serious impact as it would only be a pin drop in the economy due to the different types of cuisines present in the country. So I am guessing Balassa-Samuelson effect will be sticking around for a while more.