Rs rising is good to keep inflation low and overall health because companies will become more efficient.
But exporters will suffer.
The benefits of higher buying power must be passed along to consumers -- low interest rates, lower cost of living etc. If the prices and interest rates continue to remaon the same and on top exporters feel the pinch -- it will not benefit
Basic Minimum Wage & Low cost of living:Assume, a foreigner getting a Basic Minimum Wage of $50K or 20lacs INR/annum in abroad and an Indian getting INR $6K or 2.4 lacs/annum in India. Both amounts are approximatley good to live in those respective countries. But a westerner could contribute 833% more to GDP in $ terms, for the same 8 hr job he does.
NRI: Earning in $$$s, working the same 8 hr job, exploit exploitory conversion rates of India. India is obligated to earn forex, to makeup BOP and to fulfill its (oil)Import obligation. Surprisingly shows some vulnerabilities to have tight conversion rates, unlike western countries that have a decent conversion rates, inspite of the similar situation.
Exporters: Not sure about their real/ direct contribution to India except Indirect ones, generating jobs and earning dollars for the country. (In)famous for supplying cheap goods and services to foreign countries for his nickels and dimes.
Importers: Oil, a major import item and a commodity consumed by one-and-all in India. Oil has a direct effect on all things that matter to everybody, every day, commodity cost, goods/passenger transportation cost and etc. It controls inflation, directly.
Value of Local currency in $ terms and Walmart: Indian retailer selling same kind and amount of goods that walmart sells, cannot earn same $ revenue. Its revenue would be several hundred times less(833% less, worst-case!).
Strong INR, buys more: India's GDP shooting up 833%(best-ca
Lot of people do not understand the devastating effect of rupee depreciation on common man.
In mathematics they call it 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 man wont 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 have 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 (or other countries). 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 will 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.
But You can not 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. And they have been running huge deficit for years. Why do they do that??
Now exporters need to improve their efficiency to stay alive.
Inefficient exporters do not want to improve their efficiency. Currency depreciation is easy money for them.
What is the bottom line ?!
The country should not 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 importers do not have cheaper, quality alternatives.
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 Indian 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 SHAM SUNDER on Oct 05, 2007 11:15 PM Permalink
Excellent Analysis ...But your Quality IT Export is not going to stay in India ... All these IT Jobs, BPO and low employment ration 1.5% or whatever ? ...will be taken back All MNC opened centers in india ..because of the Currency Difference ....they save in that... after will become 1 rupee ...They might move to NEPAL or BURMA .....Indians does not innovate anything ..they just support what USA produce os anyone can do ..after..traning and experience............In chennai ... IT will go and then most of the exporters whoever is exporting ..will go ...so u will have UNEMPLOYMENT ration 98% and u won't have rupee 1 to afford tht Patrol ??
Why CHINA is not improving their currency ? becuase they are smart ..they are buying the EXPORT ...with cash reserve ..rather then ..loosing it
Lot of uneducated mexican immigrants are moving to USA in big numbers. Mexican immigrants comprise 15% of USA population. Importance given to science is clearly on decreasing trend in USA.
On the other hand importance given to Science and scientific thinking is on increasing trend in India.
Nature's rules are same to every one. There is absolutely no reason in nature that what one man can do in one nation can't be done by another man in another nation.
It is an old notion only USA can innovate. Nature had always been harsh on nations and people who deviate from science.
RE:RE:Thought Experiment
by ASHOK on Oct 05, 2007 08:50 PM Permalink
Senthil >> Thanks for the easy to understand explanation. I enjoyed it more than the main article.
RE:RE:Thought Experiment
by Baba Pratap on Oct 05, 2007 08:27 PM Permalink
This is what exactly gonna happen, If the Rupee Appreciates, People will resort to Import things rather than Manufacturing in India, coz that's easy and cheaper.
So who will be affected again ?
The poor, the Blue collar jobs will be taken away.
India's Import / trade deficit will mount up like anything.
unemployment should give us hint on policy decision. Current low unemployment rate is a historical low.
As Greenspan used to say to US senators, "you lose some export related manufacturing jobs, but you must be gaining some where else. How else could you explain low unemployment number."
What we are seeing is dollar declining across the board against all currencies. Rupee has appreciated only little bit against basket of currencies.
Rupee rally getting postponed. It is due.
For lot of Indians who work in USA, it is difficult to see the fact objectively. As their salary and asset worth are in direct proportion to Rupee depreciation.
WHO ARE RESPONSIBLE FOR DE VALUEING OUR RUPEE? THE IMF/WB AGENTS.(I NEED NOT NAME MANMOHAN,CHIDAMRAn,MOTEK & PARTY). WHEN I WAS A CHILD (55 YEARS BACK,WHEN I WAS TEN), PETROL WAS SELLING @Rs.1.25(one rupee 4 annas ) A GALLON & NOT A LITRE. THE $ WAS THEN JUST 2 RUPEES. LET ME CUT THE STORY SHORT.WE ARE A DEVELOPING NATION. OUR IMPORT BILL 'NEED'IS MUCH MUCH MORE THAN OUR EXPORT INCOME. LET US,THERE4, BRING THE $ DOWN TO COST Rs 20 . JAIHIND.
RE:STRONGER THE RUPEE- BETTER FOR INDIA
by N.P.Sharma on Oct 04, 2007 10:25 PM Permalink
I do agree ... exporters are handfull in number whereas we are 1250 million consumers ... rupee should go 1USD =20/-RS AND BY 2015 1USD -1 RUPEE
RE:STRONGER THE RUPEE- BETTER FOR INDIA
by Prof R K Gupta-India on Oct 04, 2007 10:54 PM Permalink
Great.This is possible.When I was kid 50 japanese yen were equal to 1 Indian rupee and now?In 1972 a dollar was worth only Rs 9. Indian rupee must restore some self respect atleast.Indian government should stop meddling into its price fixing by RBI.We are exhausting opur nationla wealth by exporting it keeping rupee lowe at beshest of profiteering exporters having nothing else to offer but low prices to compete.
RE:Rupee should appricate
by penmetsa kumar on Oct 08, 2007 06:05 PM Permalink
IT cestor is paying fancy salaries so you can make IT sector competitive eben with high rupee value just by reviewing the salaries to reasonable figures. also this develops the core engineering sector which is loosing many enginners to IT fancy salaries.
RE:Rupee should appricate
by Vijay Beleri on Oct 04, 2007 10:06 PM Permalink
rajesh, why are you jealous of software companies..???.. anyway it wouold be more practical to join the industry rather than wish and pray illabout others..iam not into software.. but do know it ha done good to our economy.. generated employment and provided opportunities to our graduates..
RE:Rupee should appricate
by prakhar deva on Oct 04, 2007 10:24 PM Permalink
Hi, Im a .net programmer and let me tell you my friend, IT companies are nothing to be jealous of.Most of the People working here are stupid and it will hurt nation bad 'cause they are used to working a little to get great rewards in indian currency. As rupee will get stronger, stupids wont get their bread and butter forget about good food and liquor. And its stupid for govt. to work against rupee for IT companies
RE:Rupee should appricate
by vivek wadje on Oct 07, 2007 01:07 PM Permalink
It is the doer's job that most companies start with...untill they attain a level where they start innovating and generating business on their own. You see, Indian Conpanies have now gained confidence to compete world's biggies, not only in IT but most of other sectors, some even capturing them. By the time when currency difference is negligible for markets, Indian Companies will be so large to provide employment to most Indians. If there is no currency difference, there might be a ramp down as many jobs may go elsewhere but there will be always a room for employment orelse there would be 40 times more unemployment in US than India. Some measures should be taken to play safe like start early innovation, control population and improve infrastructure to start with...You can move from a doer to innovator and thinker and let the low profile and less attractive jobs go elsewhere which is cost effective. Let us build better India!
RE:Rupee should appricate
by Satyanarayana Maddi on Oct 04, 2007 10:27 PM Permalink
Hi Vijay Rajesh is not jealous as you are thinking. He said we cannot keep the rupee value artificially low just because of few IT companies. That's true. India is not dependent on IT only but there are other fields also.
RE:Rupee should appricate
by N.P.Sharma on Oct 04, 2007 10:27 PM Permalink
It ruined Culture ... call centre mein 15 saal ki ladki ... 5-10 k sath so chuki hoti hai ... this is IT ... BULLSHIT
