Friends stop fighting.. this is just a 'virtual' growth but not in reality. Whether Rupee appreciates or depreciates, common man in India finds it's very difficult to meet his both ends. Still thousands of farmers are dieing, millions for poor people who dont have any basic needs like water, electricity, transportation, medication, etc;
Indias major export is cotton and agricultural products which are produced by 2/3 of indian population. How will we export this if rs appreciates.. only by cutting their profit margin. So. our farmes will become more poos. even though their purchasing power increases..
Beleive me these IT & BPO sectors will not get effected bacause of small changes in the exchange rate as their profit margin is very high. The salary of the employees is also high so they will cut their salary and still they will export. Can our farmes do the same? Can they cut ttheir income and compete with other world in the agricultural market? Please answer...
So Its the common man other the Govt employess who will get effected with lower wages.. as their products are not exported and demand for their product in domestic market decreases. and people import from where ever thyey get it cheap.
So then.. Why is congress allowing the Rs to appreciate? To curb inflation "virtually" I say virtually bacause. by Appreciating INR the prices will remain same or decrease but eventually the income of people will also decrease (leaving govt employees).
So please for ogd sake.. knoa that govt is only playing to curb inflation virtually by klling exports.............India's growth is not dependent on Exchange rate.
Appreciation is good for import and bad for export, but only till that day till importers pay off thier old imports. But in case, if today i import @ 40.80 and then rs. goes to 41.50-42 range then what? Appreciation is good, but this much fast, its a problem.
Contrary to the common crap stuffed over our throats that currency appreciation is not good. It is a fake theory that depreciation will enhance exports etc. Currency appreciation should be used to repay dollar loans from World Bank, our crude oil imports value will also come down. This will help in curbing inflation.
With regard to exports Indian exports should shift focus from low end export of raw materials, coolie software projects, to high end products to improve their export market. The whole country can not suffer for a few selfish rich exporters.
RE:RE:Ruppee Appreciation a Boon
by Bengal Tiger on Apr 30, 2007 07:26 AM Permalink
Mr Murthy its you who is the armchair economist because of people like you, India will always remain a third world country exporting third rate products. So, you need a walk in the park and need to smell the roses.
By the way India is also, exporting Mercedes manufactured in India. Texas Instruments say that their best research job is done in India.So, who says hi tech stuff is not possible in India? Pessimists like you would ensure that India ends up worse than African countries.
So, wake up from your deep slumber, because Rbi itself has ensure the appreciation just to counter inflation.:) Unless, you doubt the effectiveness of RBI's highly knowledgeable team (maybe you think that you are Alan Greenspan), but who cares, wake up the world is changing.
RE:[object MouseEvent]
by Bengal Tiger on Apr 30, 2007 07:53 AM Permalink
Where did i make a statement about scientists and engineers.:) So, get off the commode and start using your brains.
RE:Ruppee Appreciation a Boon
by Murthy on Apr 30, 2007 07:35 AM Permalink
Indian products are third class catagories to the extent of 90% and Indian labour pool is 600 million plus out of which only 5% are graduates, 95% are unskilled exporting either price sensitive commodities or low end goods which can be produced from China and Asean with equal ease.
I already said top end segment will not be affected even if $1 = Rs 1.
What about rest 95% ?
Just tell me a simple question. Will you buy a Chinese watch for a Swiss price ?
And why are you comparing econmies like Germany which sell the very highest quality in the world in their segments like machine tools. They sell worldwide due to their exceptionally high quality despite cheaper products available from China.
German workforce is 45 million and all consumed in high end exports not uneducated and unskilled 95% of Indian workforce which have to be producing something if they are to stay employed.
All current boom is due to exports booming since employees of IT, ITES, and good exports make 3-6 times more money than normal domestic industry catering to domestic market. Then these privilaged group buy expensive good like properties and expensive cars like Honda Civic and stimulate the entire economy of India. If demand from this segment dries up = back to growth rate of Indira Gandhi's time of 2-3%
Use your BRAIN and be a real well wisher of India considering that we have to produce JOBS for 600 million of Indian youth who are not all educated to do IT coding jobs or highest tech exports like germany.
Top end jobs will stay, but what about 95% of the rest. Do you want them to become unemployed and become naxalites ?
And no Mercedes are not being exported from India since an Indian manufactured Mercedes loses it's premium value.
Customers in Europe and USA say, why pay first world prices for a third world product ?
It is 1. Mercedes brand that commands 3-6 times the price of a similar Toyota. 2. Made in Germany stamp.
See interview of Mercedes CEO in India -
What about exports from India? When will your second plant in Pune get into production?
We will lay the foundation stone at the Chakan plant in May this year. Cars will start rolling out of the plant in early 2009. We are looking at an additional 20-30 per cent capacity from here. Currently, we already produce more cars than are sold in India.
Still, DaimlerChrysler doesn't have any plans to export cars, as we did for a brief while in the past. Exports are not part of our Indian strategy at the moment.
Also other cars that are exported out of India are SOLD CHEAPER abroad than competing brands otherwise no one will buy them.
RE:Ruppee Appreciation a Boon
by Bengal Tiger on Apr 30, 2007 07:51 AM Permalink
Mr Murthy, first off all you are way off track, we are here discussing about currency appreciation and how to use it to our advantage. Employment of majority of Indians is a different topic altogether.
If India had a population of 8 million (just make them all scientists and voila u got it !) REALITY = 1100 million POPULATION, and 600 million youths and 22 million babies born EVERY YEAR, I would be HAPPY BUT GIVEN realities, I prefer to keep currency stable at the current levels, and export out way out to generate employment.
RE:Will Rupee Appreciate further in a long run ?
by Senthil Kumar on Apr 29, 2007 08:42 PM Permalink
Most of the Asian countries (including India) (except Singapore) use their dollars to purchase US treasury bills. Treasury bills pays about 5% interest. US governments uses that money for developing USA's interest, including war on Iraq.
Lets says every one decides to withdraw money from treasury bills. Now USA 'll print money and give it to them. (It is their currency, they can do what they want!)
When every one withdraws, what you can buy with dollars outside USA decreases. As there is abundance of dollar.
RE:INDIAN ECONOMY
by v on Apr 29, 2007 08:58 PM Permalink
lol!!....u wanna kill the development???.....rupee value inc is not a cause for national pride....rather, it could result in an economical mess!!!
RE:INDIAN ECONOMY
by Murthy on Apr 30, 2007 07:21 AM Permalink
All economic boom is due to EXPORTS. Those employed in Exporting companies be it IT or goods are paid 3-5 TIMES more than normal Indians, Then these people goods and stimulate the whole economy.
Higher rupee = Indian goods uncompetitive = Lesser demand abroad = China killing Indian goose = Unemployment or lower wages here to compete = Lesser demand from Export employees = Reduction in demand from this privilaged IT employees = Slowing down of GDP back to the 70s 2-3% = End of Indian boom
RE:INDIAN ECONOMY
by Bengal Tiger on Apr 30, 2007 08:21 AM Permalink
Economic boom is a big concept, not just restricted to exports. Economic boom means double digit growth in GDP, very low rate of inflation, increasing in purchasing power, increase in savings rate... the list is endless. So, claiming that economic boom is related to exports are naive, majority of India forex reserves are because of inflows into our capital markets.
RE:INDIAN ECONOMY
by Murthy on Apr 30, 2007 08:26 AM Permalink
You are a fool who probably lives in a fool's paradise.
Japan, Germany, European Union all exported their way out to prosperity. Why is simple thing not getting in your head that export jobs may 3 to 6 times more in salaries and THESE PEOPLE PAY HIGHER TAXES and buy more goods than average stimulating entire economy.
In 80s exports were paltry at under $5 billion against $100 billion now, and growth rate was 2%-3%
RE:INDIAN ECONOMY
by Seenu Subbu on Apr 29, 2007 08:28 PM Permalink
My neighboring slum residents cannot afford to buy "luxury items" like toothpaste and shaving cream that costs Rs.50 to Rs.100 (forgive me, the prices were from my last visit in 2004). When the rupee appreciates to "1RS=40$", they will either have to roll over and die, or they will come and attack the haves. You seriously think India can achieve "1RS=40$" without taking care of the 650 million unwashed masses?
Lot of people don't understand the devastating effect of rupee depreciation on common man.
In mathematics they call is boundary condition analysis. Similar approach can be used to find the appropriate value of Rupee.
For a theoretical case : Lets Assume 1$ = Rs. 1000
Now practically all your goods would be exported to outside world. Export would be so profitable, common won't get any products (whether it is grains or gadgets).
1 Liter petrol would be Rs. 1000 1 gram gold would be Rs. 16,000
Oil would be so expensive, that even oil reserve we get in India would get exported.
What effectively happened is, we are giving all our minerals and work force of every Indian man to the betterment of people in USA. What do we get for that?? USA will print their own currency and give it to you.
In bottom line, It is plain old Slavery.
In boundary condition analysis. Lets look at the other side.
Lets assume $1 = Rs. 1
Now every thing in world 'll get imported. 1 Liter petrol will be less than Rs. 1. 1 gram gold would be Rs. 20. You can buy a good computer for Rs. 150. You can have a round trip for USA for less than Rs.1000.
You can buy a nice private jet for Rs. 50 lakhs.
You can't export any thing now.
*Unless* the product you export is really really needed by the importing country.
USA is importing like mad. They run huge deficit. Why do they do that??
Importing improves people's lives. Now exporters need to improve their efficiency to stay alive.
Inefficient exporters don't want to improve their efficiency. Currency depreciation is easy money for them.
What is the bottom line ?!
The country shouldn't rely just on exporting simple products like textiles, and minerals from your country. Software is a good example of quality export. It can with stand further rupee appreciation. Because importes don't have cheaper, quality alternatives.
RE:Thought Experiment ..
by Ravi Reddy on Apr 29, 2007 08:55 PM Permalink
Thanks for the details Senthil. If both Appreciation/Depreciation have their own drawbacks then which one is good for any country?
Unemployment in the country should dictate what the exchange rate should be.
Currently unemployment rate in Indian big cities (like Chennai) is like 1.5% This is unheard thing in history.
When there are lot of unemployed people, as a country you won't mind them working for foreigners. (not directly, but in producing simple things/services for exports.)
But with current low unemployment rate rupee appreciation is in nation's interest.
RE:Thought Experiment ..
by kumar googly on Apr 29, 2007 08:38 PM Permalink
good analysis.. software sure is a quality export. But we are NOT exporting software.
RE:Thought Experiment ..
by Bengal Tiger on Apr 29, 2007 11:37 PM Permalink
Very few people are aware of the benefits of appreciating currency, its good that you have given simple examples to enlighten people about the benefits of currency appreciation.
RE:Thought Experiment ..
by kishore kraleti on Apr 29, 2007 08:35 PM Permalink
Thanks. That was good example. I always wanted to understand import/export and foreign exchange funda, now its clear to me.
RE:Please don't hurt NRIs .. Let the rupee depriciate
by shelly gangadharan on May 08, 2007 12:13 AM Permalink
Hey is it Rajeev. if so whats ur email id. SHelly here
RE:Please don't hurt NRIs .. Let the rupee depriciate
by sachin on Apr 29, 2007 07:20 PM Permalink
I take an exception to your statment that only NRI's are smart and hardworking. Those who are unsuccessful in India become NRI's.
RE:Please don't hurt NRIs .. Let the rupee depriciate
by san k on Apr 29, 2007 07:40 PM Permalink
NRI's are more chamcha to the gora People here and much more lazy then the Indian IT People.So never consider NRI as Hardworking, They do all false and came and become NRI in mainframe boom,
It has both advantages and disadvantage. Mostly disadvantages are mentioned in the article. Now consider ONE OF the advantage. Suppose, the rupee appreciates to half, that is almost 21 to a US Dollar. Then, all the borrowings by private sector AND central AND state govts will be interesting. For example, if a state govt. has borrowed $1 billion at around Rs.42 a dollar, it got Rs.4,200 crore. Now when we have to pay back, we have to pay back only Rs.2,100 crore only, and not 4,200 crore!!!! And this is advantageous, because, state govts have their income only in rupees, and never in dollar or any foreign currency!!!! The same thing is true for central govt. And interestingly, it is true for all private sector and public sector companies. So, in appreciating rupee, it is advisable to pay back your outstanding debts in foreign currency. And borrow when rupee is depreciated. Consider central govt external debt of more than $125 Billion US and an equal amount jointly by listed companies and state govts!!!! Learn to play games to win. Remember, our economy is based on indian rupee and not in dollar. Central and State govt income and expenditure, and for companies and govt corporations. Foreign exchange comes in to picture when govt expenditure is more than its income AND when we import more than our export. Play game with other countries, with world bank and with IMF. And learn to win
