Rupee @ 40 against $ does not make india a bigger or better economy, it is the overall growth that matter.
Point that should be considered while we just talk about the conversion rate.
If 1 Rs is equal to 1$ Indian economy will be thrice as compared to USA. Does that mean india and Indians have everything better then the Americans? No.
Whatever may be the case of IT/ITES/BPO the fact of the matter is India lacks way behind even the third world countries when someone inquires about the basic ammenties that an Indian gets.
We hear a lot of Ho-Halla about million dollar flats in India which are at par with houses in US. This is a great new as we will get the best in India, BUT the moment someone leaves the boundary walls of 4.5 crore flat "INDIA" remains the same, be it roads, police, traffic, Noise, Pollution, Animals on Road, Traffic sense, Bribe, Electricty, Water, Drainage and what not. Out of 100 crore only few lakhs are employed in IT.ITES and BPO and that does not make India a candidate for developed Nation. Neither does a flat of 4.5 crore make india stand parallel to US.
India has a long way to go before it can even claim to be a developed nation.
We need to realise that unless we have the infrastructure and logistics we cannot even get closer to China. Being an Indian I realise that it is hard to digest that we have to many problem that needs to be tackeled.
Example Local Shanghai "Mumbai" has Electricity, Water/Drainage problem for last 30 Yrs
RE:Reality Check
by mangesh on Jul 25, 2007 09:56 PM Permalink
I apreciated your thougts. We need to work on our real problems like electricity, infrastructure, water, corruption etc.
RE:Reality Check
by Rakish Poulose on Jul 25, 2007 11:34 PM Permalink
Hello, Mr. Muslim, You live in a dream and you have no idea how people in third world countries live!!! Hence, you say India is worse that that! You said that you have digestion problem. Take pills for it and do your homework. Mumbai has never had electricity problem! Drainage problem is caused by the people who live there but filling up drains with garbage. Once people like you stop complaining and and stop destroying what is already there, India will soon move towards being a developed country. Cheers.
RE:Reality Check
by albert mendonca on Jul 26, 2007 02:47 AM Permalink
"Mumbai has never had electricity problem!" Have you ever stayed in bombay?? And your comments make me feel like you've come straight out of a school!!!
RE:Reality Check
by Indian Muslim on Jul 25, 2007 08:56 PM Permalink
A Rs at coversion rate of 40 gives an excellent opportunity to all the Big Wigs who are supposed to re-pay in USD. Like majority of Engg Industries, Pharma and Process industry this is the best time for them to re-pay the loan.
IT/ITES/BPO has an excellent margin not to forget they are the blued eyed boys for pushing the overall growth in India so they are the ones who will be least impacted.
Only the small time exporters who have minimal margin [Which is rarest or rare] might get affected if they are compiteting at a very low margin against other exporters.
The fact of the matter is all 33 major currencies world over have appriciated against dollar so in nutshell it should not even impact the small time exporters
RE:Reality Check
by Sriram Subramanian on Jul 25, 2007 09:26 PM Permalink
A very educated response, Indian Muslim. However, I do think that small scale exporters will be widely affected: especially in the garments and handicrafts businesses. And another thing we have to keep in mind is that while these exporters compete with each other as their goods leave Indian shores, they do have a certain monopoly power to buy labour within the villages (where they usually operate for the lowest cost labour). So if an exporter of Kanchipuram sarees for example, feels the pinch of the appreciating rupee, he can always lower the wages of the labourers(who are amongst the poorest classes with no social security).
What rubbish this is a biased story,we spend a lot on oil imports,if rupee gets stronger then we have to pay less for all the imports.cheaper oil results in cheaper transportation which will reduce inflation.simple si bath hai yaaron kuch pane keliye kuch khona padtha hai........i think IT people have enjoyed enough let others enjoy the advantages of open economy.
RE:$
by Vinod A on Jul 25, 2007 09:26 PM Permalink
Well, we talk so much of reduced charges in transportation blah blah, Can someone tell me in which all states the auto or bus fares have come down? or where all did the petrol price have come down. Dudes, stop living in fantasy world. Do u really think that the benefits of the appreciating rupee will be passed on to the common man? lets see some action to believe this.
RE:$
by Natarajan Vijay on Jul 25, 2007 09:33 PM Permalink
Vinod, The petrol rates have not come down yet because the price of petrol is controlled by the Indian govt. (I think they should not control it). If petrol were produced/dsitributed in India by private companies, it would have come down already. Because it is controlled by the govt. they do not want to lower the price (eventhough their raw material cost is lower). If crude oil price is going to increase later on, they would be forced to increase petrol price which would be politically tough. The solution is to privatize this sector, as all sectors. However, the Re is lot stronger than it was 10 years ago. Have you not noticed that flying in India is also a lot cheaper that it used to be 10 years ago?
RE:$
by sreekanth agneswaran on Jul 25, 2007 10:46 PM Permalink
Mr. Natarajan, now just put this comment that you have made about petrol prices coming down (which is what common sense dictates), in contrast to the other article put up by rediff : Petrol prices are actually going to increase!!! Which is the point, I guess Vinod is trying to make!! Forget privatisation of fuel... The government is never going to kill the goose that lays golden eggs for them...
RE:RE:$
by Rakish Poulose on Jul 25, 2007 11:38 PM Permalink
Petrol prices are much lower than what it should be to match the cost price. If oil is available cheaper, it means that the Govt will have lesser losses!!
RE:$
by Rakish Poulose on Jul 25, 2007 11:37 PM Permalink
Petrol prices are much lower than what it should be to match the cost price. If oil is available, it means that the Govt will have lesser losses!!
RE:$
by Natarajan Vijay on Jul 25, 2007 11:40 PM Permalink
Sreekanth, There are going to two forces that affect petrol prices. One of them, which should reduce it, is the appreciating rupee. The other, which should increase it, is the price of crude oil. There is a long term trend in increasing crude oil prices due to increasing global demand, especially in China and India. This trend will eventually also lead to increasing petrol prices. Because the RBI is letting the rupee appreciate, I think that indian consumer would pay less for petrol than he would otherwise. But I fully agree with you that the benefits for the consumer would not be certain unless this industry is privatized. Maybe crude oil is not the best example of the point that I was making, which is that the appreciating rupee increases the purchasing power of the indian consumer in the global marketplace.
RE:$
by Vinod A on Jul 26, 2007 12:10 PM Permalink
Natarajan, All this economic and fundas are good in the theory classes. Lets see something practically right. I mean the common man is least bothered about the laws of economics. The point I am trying to make is simple. Despite the rupee appreciation how much of the benefit has been passed on to the common man. Don't give excuses like govt is controlling and blah blah other factors. My point is simple, whatever is the condition of the rupee, the government will for sure maintain an equilibrium. The government was giving sops to exporter due to this rupee appreciation, where do u think this money is coming from? again from the common man. So all and all, u will notice there is not going to be any difference. If u can give me more practical examples than just economic theory, I could be more convinced.
RE:$
by Natarajan Vijay on Jul 26, 2007 09:25 PM Permalink
Vinod : Here are some concrete examples of how Indians benefit from rupee appreciation.
When an Indian buys a DELL computer from the US, it is cheaper. When an Indian buys Microsoft Office, it is cheaper. When Kingfisher airlines buys Boeing Jets, it is cheaper. The net effect is that they will buy more jets and invest in aviation, which will make air travel relatively cheaper. India also imports all kinds of capital goods from outside. For e.g. most of the cars sold in India are manufactured in India. But to manufacture the cars, you need captial goods which are imported. When these become cheaper, Cars will also become cheaper.
These are just some of the things of the top of my head. Simple idea is, imports is what we consume. It is what we consume which makes us rich. Exports are what we pay for imports. When I go to a shop, I try to buy as much as possibel while paying as little as possible. When the rupee appreciates, it makes our imports cheaper! This is just simple fact!
I got to tell you guys. This whole series of articles warning against the rising rupee on rediff is just getting on my nerves. Does'nt rediff have any economist to read these ignorant articles before they get published. An "economist" is someone who has a Masters or a Ph.D. in economics and ususally they spend their career studying trade, exchage rates, unemployment, GDP growth etc. It is a good idea to get these experts to actually read these articels before they get published!!! These articels spread several pieces of false information and this is done so many times that it is stupid!!! MYTH #1 : RISING RUPEE MAY LEAD TO UNEMPLOYMENT : There is no evidence whatsoever that trade or lack thereoff will lead to overall increase in unemployment. Yes, change in the pattern of trade may lead to reallocation of labor to different sectors. For e.g., rising rupee may lead to certain Indian airlines buying Boeing jets to increase their service leading to more jobs in aviation eventhough jobs in software industry might decrease. But the overall level of unemployment will be unaffected. When the govt. spends tax rupees to artificially undervalue the rupee, it is transferring wealth from those who are not involved in the export sector to those who are. These things should be left the market! When market is left to act onits own, resources get allocated such that India's comparative advantage is exploited. Rediff : Please get an economist!!
RE:Rising Rupee Does not Hurt Us!
by Natarajan Vijay on Jul 25, 2007 08:58 PM Permalink
Another excellent point made on this board is the price of oil. Average Indians will pay less to fill up their cars and Hero Hondas. Lets take a closer look. For e.g., let us assume that if the RBI were to let the rupee float, then the exchange rate would be Re30=1$ (I dont know what it will be exactly, only that it will lower than the 40Re now). What the RBI is currently doing is paying greater than the market rate i.e. it paying Re40 instead of Re30 to those who sell their dollar. It is this a Re10 discount to dollar sellers. It is in effect a Re10 discount to buyers of Indian software services in the US and Infosys/Wipro get the benefit of this discount int he form of greater profits. But where does that Re10 come from? The govt. either pays it out from tax money or just prints this money. If it pays it out in tax money, this money comes from all Indians, whether they are involved in exports or not. For e.g. doctors dont export their services but they pay taxes so do bus drivers, retails business owners etc etc. The govt. thus taxes all Indians for the benefit of those in the export sector. (The conclusion is the same if the govt. prints the money, the tax is in the form of inflation). This is really stupid. Why should the govt. rob the poor bus driver and pay it to the rich Narayana moorthy and the rich software engineers!! Let the market do its job!
RE:Rising Rupee Does not Hurt Us!
by Gangadhar Annapareddy on Jul 25, 2007 10:08 PM Permalink
Stop the nonsence. This is classic common indian mentality, jolous on the guy who earns more, even if it comes to one's own brother.
RE:Rising Rupee Does not Hurt Us!
by Natarajan Vijay on Jul 25, 2007 10:39 PM Permalink
Buddy, I am not "jolous" of the guy who earns more. Let software engineers make all the money they want in the free market. I even think that it is unfair to tax the rich heavily since their excess money could be used for investment which may create jobs. I am only saying that it is unfair to subsidize software engineers (or anybodyelse) with other people's money. I welcome RBI's decision to appreciate the rupee. But they should let the rupee float. What exactly is their policy anyways? Nobody knows? Are they targeting inflation? Or they following monetary aggregates? Will they let the rupee float..if not, what is the range that is acceptable to them? This institution has no transparency! You want us to blindly accept their wisdom! I am not cattle or sheep. I need answers!
RE:Rising Rupee Does not Hurt Us!
by Rapid Snail on Jul 25, 2007 08:46 PM Permalink
What would airlines buy more planes for when the main users(mostly export companies and IT workers on holidays etc) are in economic trouble?
You seem to forget that other than agriculture, exports(IT and non-IT) are a major force in supporting the economic growth in sectors like aviation etc.
Get your economics-101 straight before writing such BS
RE:RE:Rising Rupee Does not Hurt Us!
by Natarajan Vijay on Jul 25, 2007 09:07 PM Permalink
It would be folly to "engineer" growth by stimulating exports. We should just let the market work. I am not in favor of forcing software engineers in India to work for less than their market wage just to make Infosys more profitable. Similaryly, I am not in favor of spending tax money to keep Re artifcially undervalued to help Infosys. It is also a mistake to think that only the software industry can drive growth. Growth in general is driven by three factors : (a) Capital accumlation/influx (b) Productivity growth in the form of education/infrastructure/technological change (c) economic liberalization such as relaxing draconian labor laws, encouraging influx of capital etc. If these are inplace, all sectors of the economy will grow. If you think software engineers are so great, go compete with americans on the basis of greater productivity instead of pleading with the govt. to keep the exchage rate low. Afterall, american software companies dont get the US govt to keep the dollar undervalued! Keeping the rupee undervalued will distort the market and make us too dependent on the export sector. If hillary clinton comes to power in the US, she might impose Tariffs on Indian software products...that will really hurt then!
RE:Rising Rupee Does not Hurt Us!
by Baapu on Jul 25, 2007 08:48 PM Permalink
Good One N. Vijay. I believe after looking at current Re rising UB Group Chairman Mr. Mallya must have rang up Airbus to deliver their JETs asap.
RE:Rising Rupee Does not Hurt Us!
by BHAY on Jul 25, 2007 10:48 PM Permalink
Guys, I see 3 affects of the weakening dollar. 1] Cost of petrol going down. I dont think this will affect the consumer. When the price was rising, the govt. kept the prices pretty steady. Why should they decrease the prices now? 2] Exporters/IT/BPO firms taking a hit - Though the profits of infosys and wipro are small compared to India's oil bill, my point is that these companies generate thousands or even lakhs of jobs - which gives the economy a push. And which is really vital. I would assume that to keep up profits, companies would resort to layoffs. The third thing I see no one has talked about in this forum, is the forex reserves that India has, and the US govt. debt that India has bought. Remember, these amounts are huge and all are in USD. A depreciating dollar also means that India's forex reserves depreciate and the debt instruments earn less. I am into IT, working in the US, but if the rupee rise is good for India, I would gladly accept my loss as a small gift to my motherland.
Dear All apart from EXPORT unit....the middle class people those who are working outside the country and getting salary is in huge lose...it is depreciation and appreciation...expatraite's are also contributing revenue to modern India...Now, world is a global village..there is nothing to feel happy if rupees get appreciation against dollor , bottom line we require stable dollor for our growth / development....
RE:persons having salary in dollor's
by Sarith Sircar on Jul 25, 2007 10:20 PM Permalink
Stupid comment. Do you even know the correct spelling of "Dollor"?? Moron!
Rise in rupee is not that India is going to be a economic giant. Its good for some company and bad for others.Government should allow to increase the Rupee or decrease its value depends on how its going to affect the Indian economic in future. Japan the 2nd largest economic has $1 = 122Yen. But still they are economic strong. Since each and every product they export their economic become string with fall in yen value. So Rupee rise is good or bad depends on our export and import ratio.
RE:Rupee Rise so....
by Ajay on Jul 25, 2007 09:16 PM Permalink
Fact is
1 Re ~ 3 Yen.
100 Sen = 1 Yen.
Before the war 1 USD ~ 2.5 Yen.
Right after war 1 USD = 360 Yen.
effect of Rising or falling Re is based on ones personal scenario. It is bad for IT / BPO / NRI if they are comming back to india. What needs to be analysed is if it is good for resident Indians?
Would rising Re lead to deflation. Also, is deflation such a bad thing?
RE:Rupee Rise so....
by Baapu on Jul 25, 2007 08:34 PM Permalink
Excellent Anil. I appreciate your last line "So Rupee rise is good or bad depends on our export and import ratio." Great.
Doller value is depreciated. How can we say rupee is appreciating. Rupee value is same as before any other currency except Dollar. Our exporters are really suffer as we exports more to US or in US dollar.The ultimate result of present scenario would be badly efect us. many people lose job many exporting companies goes on loss.
It seems to me that this moaning and groaning about the rise of the rupee is from a single point of view - that of the Tech companaies. I have not read a word about the impact on the major dollar outgo of the country - oil. Surely a stronger rupee means we pay less for oil ( 70% of the national requirement is imported, and this is the biggest single expense, as mentioned). Surely that has a cascading effect on all prices, and on the national economy as whole. Why hasn't anyone talked about this? Or is IT all that matters today in India?
RE:Biased viewpoint
by bharat on Jul 25, 2007 08:23 PM Permalink
IT ! really matter indian ecconomy. we were buying Oils since India got Indipendance. It never effected our economy's growth ungrowth. When the IT sector booms Indian ecconomy starts growing. As the topic above says is it really indian rupee appreciate. Only |Dollar depreciated to all other currencies. Indian rupee value is same as last year against Pount Sterling or Euro or any other currency. so we can say this way week dollar will badly effect our exporting. result many job cut and companies shut downs.
RE:Biased viewpoint
by Rapid Snail on Jul 25, 2007 08:52 PM Permalink
It is not just IT. Every exporter in the country is affected - and that includes farmers of cash-crops and spices, fishery based industries, food-processing industry and plenty of others.
Also just because we get cheap petrol doesn't mean our economy will grow faster.
RE:RE:Biased viewpoint
by the assassin on Jul 25, 2007 08:47 PM Permalink
hats off to you..you pointed out really an important aspect of rupee appreciaton..
Every one is selfish. those who benifit from appreciating rupee will support it & those who has negative effect will curse it. Actually the apprecaition is good for Indian economy but only it had to be at a gradual pace say 18-24 months instead of sudden rise.
I think this rumour mills generated by the media is a well archestered attempt by the IT Cos by carefully planting stories so that they can go ahead with adverse actions against employees in the name of profit booking. These journalists can be sold for one night dinner or worse, some cheap gifts.
I am telling you this increase in working hours bla bla will not work for IT cos
Can anyone pls squeeze some time amid their busy schedule to let me know that: For ex: Is rupee rise means 1$=40 Rs. OR 1$=45Rs. Would appreciate your valuable comment
RE:What is Rupee rise?
by karthik swamy on Jul 25, 2007 08:05 PM Permalink
Rupee rise means lesser amount for 1$. So if yesterday, if you had 1$, you could exchange the same with 45 Rs., but today you will only get 40 rs. This is a serious concern because, imagine if you were working in the US and you earned in dollars, so the amount of money you are making in terms of rupees value becomes less, if rupee strengthens. Also the immense growth which we see India has encountered in the last decade or so has come from software exports, outsourcing etc. Now, imagine, if for one particular service, you used to get 1$, which till yday made you 45 Rs. at home, but today you will only get 40 Rs. Same with all other services for which we depend on USD. This will effect the salaries that are paid to all the IT employees as the amount of "money actually made" would decrease, because the US client wont pay us more if the INR value has risen. hence, this will also result in India losing it's "Cost Advantage" over other countries. We would have to come up with a new advantage that we can give to our clients in the US.
Okay i think i have written a lot...sorry about that...hope you got your answer and a bit more info...:)
RE:What is Rupee rise?
by Baapu on Jul 25, 2007 08:17 PM Permalink
Karthik:
Appreciate your detailed response. But still its quite confusing that why do we say "Rupee Stronger against dollar" if we exchange it for 40 not 45. Since the value has come down & we are exchanging dollar for lesser amt, we must say "Rupee Weak against Dollar". This is my point of view. And if Re. rises or strong against USD..I understand Exporter like big daddies TCS, Wipro n all will have adverse affect. But how Importer will get benefit from it?
Would appreciate valuable comments from Experts. Thx
RE:What is Rupee rise?
by Raj on Jul 25, 2007 08:40 PM Permalink
Bapuji rupees is stronger because we are paying only 40 now but earlier we used to pay 45, so the difference of 5 rupees makes the RS stronger. Importer will be benefitted because earlier they had to pay 45 rs for any imports but now they have to pay only rs 40 for any imports so thats a profit of 5 rs for them.
RE:What is Rupee rise?
by Ashwin on Jul 25, 2007 08:46 PM Permalink
Baapuji, rupee is stronger when you can get more dollars for your rupee. So, when $1 = Rs. 40, rupee is stronget as compared to $1 = Rs. 45. Hope it helps.
RE:What is Rupee rise?
by Baapu on Jul 25, 2007 08:53 PM Permalink
My heartfelt thx to everyone for their quality time spend to post valuable comments.
When you can buy more dollars with less Rupees it means Rupee is rising . for eg today you can buy one dollar for 40Rs so Rupee is rising.. get it?
Importers benefit because if you are importing a car from US which costs lets say $1 then now you are paying only Rs 40 for the car earlier you were paying Rs 45 . I hope this is simple enough
RE:What is Rupee rise?
by Baapu on Jul 25, 2007 08:43 PM Permalink
Thx Mr Bhagwat for your prompt response. 1. Is it Good for Indian economic Growth? 2. How do we evaluate these figures?
RE:What is Rupee rise?
by Amiruddin K on Jul 25, 2007 07:54 PM Permalink
dear Baapu Rs Rise means 1$=40 which is not good for our export.Bcz if we will sell we will get forgein Exchange (eg. US$) so Rs must keep low as China is doing with it's currency(They are not revalueing bcz they know it will effect to they big export.)
RE:What is Rupee rise?
by rajesh jha on Jul 25, 2007 08:12 PM Permalink
Dear friends China's currency is apreciated by appriciated by around 8.5% in a year. Now it is 7.54 per dollar compared to 8.05 a dollar a year back. But I agree this affects exporters as well as dollar earning persons like us whose salary has gone down by 15% without any effort.
