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BDS Current Issue Volume XXXVI March 2013 Number 1

Testing the Existence of Purchasing Power Parity in Bilateral Trade between Bangladesh and India


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The paper uses the data of exchange rate and ratio of GDP deflators of Bangladesh and India covering the period 1971-2011 to justify the presence of Purchasing Power Parity (PPP) between the two countries. Unit roots test has been used to confirm the stationarity of the data. Cointegration test is used to verify the existence of a long-run relationship between exchange rate and the relative cost of bundles. While these two variables are not observed to be in equilibrium in the long run, Granger causality test finds no causal relationship between the two. This disequilibrium is further escalated due to the imposition of trade restrictions or other conditions affecting the bilateral trade relationship. These obstacles need to be addressed in order to ensure the stability of the exchange rate and maintain favourable trade relationship based on PPP.

Vulnerability of Livelihoods in the Coastal Districts of Bangladesh


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The paper uses the Livelihood Vulnerability Index (LVI) to measure the vulnerability of households living in the coastal region of Bangladesh. The results, based on the findings of a survey on 532 households from 12 coastal districts, indicate that rural households are more vulnerable than urban households, while households living in coastal districts are more vulnerable than those living in exterior districts. Finally, households affected primarily by cyclones are found to be more vulnerable than those affected by floods. The higher vulnerability of coastal households stems from poor access to health facilities, a weaker social network as well as from natural disasters and climate variability. The higher vulnerability of rural households is also explained by poor health factors such as lack of access to sanitary toilets. The rural households also have adverse social and demographic profile, weaker social networks and they are more vulnerable to natural disaster and climate variability.

Economic Analysis of the System of Rice Intensification: Evidence from Southern India


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The System of Rice Intensification (SRI) – a new approach to growing rice – is gaining rapid momentum in South India. The present study analyses the efficiency of SRI cultivation in the state of Kerala. The study reveals that the major expenditure in SRI is incurred on labour costs and there is a reduction in the cost of seeds. The average yield under SRI is found to be more than 27 per cent higher than that of rice cultivated under the conventional method. The net returns and benefit-cost ratios are higher for SRI farms due to higher productivity of paddy cultivation. Overall, the SRI farmers demonstrate higher efficiency relative to their counterparts under the conventional method. Training facilities and demonstration trials are needed to be scaled up so that more farmers become aware of the SRI technology. 

Impact of Health on Farm Production in West Bengal, India


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The paper examines the impact of farmers’ health status on farm production at selected villages in West Bengal, India. Using a household production function model, the study finds that health status as measured by the number of sick-days reduces farm production. However, nutritional dimension of health indicated by BMI does not influence the farm production significantly. The issue has been further analysed using a profit function approach. The findings are consistent with other studies in which individuals with BMI as low as 16 are found to be healthy and actively participating in agricultural work. Although health status appears to be a significant determinant of farm profit for the marginal farmers, it is not so significant for the farmers with relatively large holdings of cultivable land. The study further reports that the disparity between agricultural wages and wages offered by MGNREGS programmes in the sample villages makes the farming activity less attractive and hence, increase in enrolment in MGNREGS work seems to have a negative impact on farm profit per unit of land.

The Microinsurance Market in Bangladesh: An Analytical Overview


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This paper provides an analytical overview of the current state of the microinsurance market in Bangladesh comprising of products offered by commercial insurance companies, microfinance institutions (MFIs) and those by INAFI’s MIME programme. For the commercial life insurers, available products are characterised by a mix of inadequate risk coverage, excessively high premium rates unrelated to any plausible model of mortality of the insured, lengthy process of claim settlement and, above all, high costs of intermediation. Such products therefore appear unattractive to the vulnerable. The MFIs, on the other hand, mainly offer loan insurance thus minimising lenders’ risks and having a much quicker claim settlement process. Some MFIs also offer a variety of other products (notably, term life, health and livestock insurance). However, the health plans reviewed in the paper clarify that most of these are not examples of true insurance products since the bulk of the risk eventually remains with the insured. The requirement of cash transactions in each step of the way is a further drawback eroding popularity of the products. Finally, it is seen that, while INAFI has been implementing both term and endowment life policies, the premium structure appears rather steep vis-à-vis the cost of risks, presumably reflecting high costs of intermediation. In view of very limited competition in the market for commercial life coverage, regulatory directives may be targeted at improving competition in each segment of the market, thereby fostering innovation and fair play.

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