# Spare A Thought, If Not A Rupee

Dr Haseeb Drabu

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In 1873 a newspaper notice to American buyers in Paris, lists the price range for Kashmiri shawls to be 2000-5000 French francs. This advertisement is preserved by the Weaving Art Museum for all to see.

On an exchange rate basis, 5,000 French francs (now demonetised in favour of euro), was equivalent to Rs 53,000 in 1873. Three years earlier, Dadabhai Nairoji (one of the founders of Indian National Congress and father Swadeshi economics) estimated the per capita income of an Indian to be Rs 30.

In other words, the price of a Kashmiri shawl was 1,766 times the per capita income of an Indian. Or to put it crudely, in 1870, it would take an average Indian 1766 years to buy and possess a high-quality Kashmiri shawl!!!

In 2011, the per capita income of an Indian is Rs 53,311. Assuming that the per capita income to the price of shawl multiple is the same (i.e on a value basis), the price of a top-end shawl should be a mind-numbing figure of Rs 9,41,82,766, that is more than nine crore of rupees!

It may be argued that Nairoji had deliberately under-estimated the per capita income of India to show a higher burden of taxation on Indians and that the post-independence pace of growth in income was higher than commodity prices.

Look at it in terms of the French per capita income. When the price of a top-class shawl was 5000 French francs, the average per capita income in France was just \$1746.

So, a shawl was three times the per capita income in Europe. Today, the per capita income in France is \$40,592. On a three-factor basis, the shawl equivalent price should be \$ 1,21,776. On the current exchange rate, this is equal to Rs 63, 32, 352! To validate this estimate, it can be cross-checked with another commodity, gold, which is the standard measure of value.

In 1873, 1 franc was equal to 0.290322519 grams of gold. As such, 5000 french francs would fetch you about 1,500 grams of gold.

With gold priced at Rs 30,000 per 10 grams, the price of shawl should be Rs 43,54,838!

To complete the scale, the offer to buy a regular shawl (as against a top-end shawl) was 2000 French francs. This means than on the gold standard a shawl should be selling at around Rs 17,41, 935, that is about 17 lakh rupees! On the international per capita income basis, a regular shawl should be selling at Rs 25, 32, 940 or about twenty-five lakhs!

Forget the complicated economics for a minute. Let me price it on a personal anecdotal basis. In 1956, my grandfather brought an 8 bedroom palatial house in an up-market locality in Srinagar for Rs 55,000! That was the price of one shawl in 1870!  Just by a back of the envelope inflation calculation, one shawl in 1870 would have bought him two houses in palatial Srinagar!

Today, you will be hard-pressed to sell a shawl and buy curtains for one room in that house. That is the extent to which what we produce has been underpriced and what we consume has been overpriced.

Who is exploiting whom?

Who is dependent on whom?

Who is subsiding whom?

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Haseeb A Drabu is an economist. He has worked with the Planning Commission, Finance Commission, and Economic Advisory Council of the Prime Minister. He has also been Economic Advisor to the Government of Jammu and Kashmir and Chairman and Chief Executive of the J&K Bank. His last public engagement has been Finance Minister of Jammu and Kashmir.