Feasibility study for a common South Asian currency

Abstract

The following CCS project aims to study the feasibility of a common South Asian currency. In doing so, a study of the Optimum currency area theory is done along with the development of Euro and the Caribbean Dollar. The SAARC nations are analyzed against the preconditions of OCA viz. the openness of the economy, the extent of factor mobility et al. The study clearly indicates that there are various factors that makes inhibits the formation of a common currency union for the SAARC nations. A further study of the BIMSTEC group of nations is done under similar conditions. The result of this analysis is the same as that of the SAARC. Finally, we have suggested that if at all India would want to join a currency union; it would make be better if it joined a group like the ASEAN. Other options suggested are to form a common fund instead of a currency union. It has been recommended that the current scenario is not suitable for the formation of a common South Asian Currency, but in future it may become a possibility