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.
RE:Rising Rupee, does it hurt us ?
by Samudraniel Dasgupta on Jul 25, 2007 11:34 PM Permalink
India's forex reserve should consist of a basket of currencies and Gold.When any currency weakens, the dealers at RBI shift the currency position. A USD depreciation, therefore, might not have harmed our reserves to a great extent. However,a rising rupee and a robust forex reserve are much better than what we had experienced in 1991 when India had to pawn gold with Bank of England and the forex reserve was less than one Billion.
