It is the time when the ruppee should be left to appreciate without intervention.Though this will have negative impact over exports, for a while but because of imports will be cheaper which will cool off domestic supply constraints as well help in costs of manufacturing,ultimately supporting the exports in medium and long term. our trade balance is negative increased imports will help out competetiveness,since It sector has got the movementum going they should look for larger volumes at lower margins to keep up with the international competence.Ruppee appreciation will cool of spur increase in property and labour costs in return, which is good for the export oriented industries.Demand and supply impact will balance to price perceptions.Moderate inflation is the sign of healthy supply line, else the manufacturing instead of making pace with(higher volumes) supply they tend to lay back and profietering.Classic example is cement indusry. As they fore see huge demand in medium and long term but insteat of initiating to crease to fill the supply constraint they have opted to lay back and make unproportionate profits. Though their cost have not or marginal increase inpast couple of years. Let Mr.Ruppee do what Kamal nath would not like.Time to celebrate to be part of trillion club.
RE:The great indian ruppee trick.
by ASHOK on Apr 28, 2007 04:56 PM Permalink
I agree, we should not just devalue rupee for nothing. We should rather adjust surplus Dollar by buying more. And reducing Import duties on these imported goods, which we buy more.
One such thing is Crude oil ( If we buy it more and reduce Excise as well as customs on it) we will directly impact Inflation at home. We will increase domestic productivity by reducing cost of transporattion / it will reduce cost of production. That will impact both Cost of products with in India as well as exports.
Unfortunately Govt wants to spend this money in Malls where they will keep Luxury watches / cameras / imported garments / Sarawosky crytels That will do nothing but fill the pockets of ploiticians as they have investment in thses MALLS and imports. Where as these ploiticians can not take money out of Refineries / gas stations etc if petrol and Diesel prices are reduced.
