The best way to solve this problem is to hold foreign reserves in Euro also besides dollar reserves. This will protect the Indian economy against drastic fluctuations in the dollar value and will also make the rupee more stable.
Make sure we do not sell dollar reserves but start accumalating Euro reserves from now onwards!
Dear Mr M R Venkatesh, your article is great solace to me personally that I am not the only one to think that appreciating Rs is good and must capitalise on this shift in curreccy. having devalued our currency three times i.e., 1947-48, 1966 and then 1991 we have made a mess out of economy. It is high time that we correct this historical blunder. It is high time we focuss by privatising the defence sector and heavy industry segment for development which will reduce our import bill and for earning the foreign exchange we dont have to export onions and potatos which use to be the case and still is tha case. Inflation will automatically will be in check. Export sugar to earn foreign exchange for inport bill of heavy machinery and weapons. what a cruel joke.
How about measuring the GDP of the nations in terms of Tons of Gold? This will solve the issue of depreciating /appreciating currencies vis a vis Dollar. It may have meant some sense in the past - but going forward, we can adopt the gold measure.
RE:How about measuring the GDP in Tons of Gold!!
by Ajay on Jun 20, 2007 07:30 AM Permalink
Another problem is it restrict the total money supply you can have. So ifyuor country ahs gold worth 10 Bn that's all the money you will have? it was Ok till 1960s and today it is too little.
One should expect the Rupee to appreciate further in the coming years, maybe to the tune of 5% -7 % per annum.
With this, the Indian industry will be forced to become more innovative and export more value added stuff rather than low value products and services.
Moreover, it will be easier to import technologies and apply on a large scale in India.
It is a fact that the export companies have been massively subsidized at the cost of the rest of the country. It is high time that they become more productive and seek less sops and incentives year on year.
It seems the Author has this perception that a higher Currency value automatically means a mightier power.
Based on this inaccurate perception his points, though well articulated, does not represents India's case well.
1USD = 150 Japanese Yen
But Japan is a 3rd or 2nd largest economy in terms of trade value.
No country can be an self-sufficient and self-reliant economy and it needs to balance well its Imports and Exports (maybe except North Korea)
The amount of FDI India has today is cause of the Service oriented work that the country has been exporting. Foreign countries are not interested in the development of our country and their FDIs are purely from self-need.
They need the massive manpower (and of course at cheap rate) so that their massive gigantic Corporations can compete well in this Free-trade World. (think China).
Ofcourse we need to carter our domestic market, but when the majority of this domestic market is lacking basic needs of life, who in the world would think they would be interested in export oriented products (IT Softwares, Laptops, Designer Textiles & Footwears, Leather garments etc)
Japanise economy is one of the highly inflated economy where having billions means nothing! They have become high-quality human robots delivering products for cheaper rates for western countries FOREVER! They dont have social life for Godsake!
Japanese work for foreigners and foreigners only. Japan as a country has highest suicide rate in the whole world. And Japan has lowest birth rate in the whole world. That tells you all about Japan.
RE:Very misleading article
by Anirban Sarkar on Jun 19, 2007 06:55 PM Permalink
let me also tell you that Japan has the highest number of people in the world who are above 100 years old...japanese are known to have the highest life expectency in the world...check this link, educate yourself and then post comments... http://news.yahoo.com/s/nm/20070618/wl_nm/japan_oldest_dc if exports mean working for foreigners and most Indians are "sickly" prejudiced like you then only God save Indian economy... :)
RE:Very misleading article
by Anirban Sarkar on Jun 19, 2007 07:13 PM Permalink
the number of people dying in india out of starvation should be 1000 times more than the suicide numbers in japan...i would prefer the 2nd largest economy with high suicidal rates rather than 6th largest economy which has most of the population struggling from malnutrition and worst still metros yet to find a permanent soultion to cope up with seasonal recurrence of malayria, dengue and God knows what other germs...
Japan and Germany are so lucky that they got defeated on 2nd world war. They didn't have to spend any money on defense since then. :-)
Japan was economic power even before 2nd world war. India started it late. But has done a pretty decent job.
On an unrelated note, life expectancy calculation is skewed by child mortality rate affecting the calculation. (i.e. Lets say a Man lives to 80 years. But another child dies at birth. Life expectancy would be 40 ((80 0)/2).) So countries where infant mortality is high are have low life expectancy.) On the other hand Life expectancy of 40 year old is practically same whether he is an American or Indian. As a matter of fact life expectancy of 40 year old today is only slightly higher than 40 year old lived in Shakespeare's time. (search on google on "life expectancy calculation skewed by infant mortality rate" for more info on this topic.
RE:Very misleading article
by Anirban Sarkar on Jun 19, 2007 06:45 PM Permalink
social life..... :) i thought we were discussing about currencies...anyways you can't deny japan is the the second largest economy in the world...their post office has a deposit of 3 trillion USD...three times the indian economy size...
Learn back economic principles before u comment. Stonger the currency, mightier the power. You automatically become superpower once your currency is global currency. (See euro - dollar fight)
RE:Very misleading article
by Anirban Sarkar on Jun 19, 2007 06:37 PM Permalink
Not necessarily... 1 POUND=80Rs...assuming linearity UK should be the strongest economy in the world which is definitely not the case...don't make a country's status directly porportional to the currency value...like pointed out above japan is the second largest economy and yen is widely traded although 1USD=150 Yen...
RE:Very misleading article
by Shiv Nagare on Jun 19, 2007 07:35 PM Permalink
Perhaps there is a mis-perception. The strength of a currency is not reflected by the arithmetical equation of its currency unit to the dollar alone. What is more important is the change in this equation. If the yen in 1980 was 700 to the dollar, and is 150 today, that shows that it is the equivalent of about four 1980 dollars today. That is strength.
we have 200$billion forex ,for 1$ we have 5RS loss for 200$ billion we have Rs 1 trillion as per ratio 1:5 now Rs 1 trillion = 25$ billion
so the moral of the story is if we have more forex in terms of dollars they changing statics will affect in other way reducing our forex
in long term american economy will not be affected they have kept their tresures in terms of gold u see once dollar loses its 20% value it will rebound all countries forex reserves will compensate the loss as they have accumulated trillions of dollars
The only factor that could bother Indian exporters is the steady yuan against appreciating currencies. Yuan has not significantly appreciated and could hurt exporters in other countries.
RE:Steady chinese yuan
by Hopes Consultancy on Jun 19, 2007 06:26 PM Permalink
Not in long run. Because u get cheap raw materials, technology, gas, power and labour. Basic principle of economy. "Every thing adjust to itself with times, what matters is insfrastructure and productivity"
Whatever the GDP and growth rates of India may be today one must not ignore the fact that all these sky-rocketing figures came with the rise in IT and Outsourcing industries which leveraged the rupee-dollar exchange rates and hedged operational and technological costs.
What the rising rupee is doing is in turn eating into the cost-advantage factor and in turn not doing us any good in the long run. The important difference between China and India is while the former is manufacturing driven we are primarily service-driven. We cannot do what China can do because they are self-sufficient both in terms of manufacturing and agriculture. We have a good position in agriculture but not so in at least basic manufacturing.
We need to retain the cost-advantage for the time being and try to leverage this phenomenon as long as possible because even this is not going to last forever as salaries will keep rising. On the other hand using this advantage we should equip ourselves on the manufacturing side and help make us export surplus in manufacturing, agriculture and services. It is then that we should live rupee free in the market and use our global export share to virtually force all the "developed" countries today to accept rupee as an the No.1/2/3 currency. That should be the strategy. On the other hand all the rupee surges that we see today are nothing but part of microscopic political agenda of the govt. to control inflation and win next election. This is not taking us anywhere.
RE:Illusion
by Manohar on Jun 19, 2007 07:38 PM Permalink
That is a great explanation! so, your point is that, become more self sufficient and then get into the currency game, right!
RE:Illusion
by rajesh singh gulia on Jun 19, 2007 07:33 PM Permalink
I agree with you. IT service sector is the solely responsible for the wide area of modern lifestyle...malls, housing at early ages, cars for the young couples etc....We lack manufacturing advantage. If we loose on this service industry because of Re appreciation, all these luxuries will go with the wind.
