Although we have scant data on cross-border transactions among the separate states, anecdotal evidence suggests that over the decades significant apparent imbalances have been resolved without precipitating interstate balance-of-payments crises. The dispersion of unemployment rates among the states, one measure of imbalances, spikes during periods of economic stress but rapidly returns to modest levels, reflecting a high degree of adjustment flexibility.
*  *  *  Assistance provided by Balbir Kaur, Praggya Das, Abhiman Das, Nishita Raje, Muneesh Kapur, Rekha Misra and Deepa Raj is gratefully acknowledged. This address draws upon the ongoing research project in the Reserve Bank on structural drivers of food inflation in India.