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.
