I dont know how many of you remember exchange rate history before 1991. At that time, RBI was involved in appreciating the Rupee to keep India's dollar denominated debt load managable. There was constant talk about India defaulting on its loans. Today it is just the opposite, the RBI is undervaluing the rupee. We have to ask why? When the country is stagnant, our currency depreciates and when we grow our currency appreciates. This is becasue, when we grow, foreigners want to invest here, which increases the demand for rupees cause it to appreciate. It is the opposite when we are stagnant. But what exactly does the appreciating rupee mean. It means that the purchasing power of Indians is increasing. When India is growing, the productivity of the average Indian is growing. This means that an average Indian's work gives him more purchasing power in the global marketplace. This is what is reflected in the appreciating rupee! American computers, Boeing jets, crude oil etc. etc. are all cheaper. Our purchasing power is increasing, Indians are rewarded. But this will happen only when the rupee appreciates. When the RBI intervenes and undervalues the rupee, it is undervaluing the average Indian's global purchasing power. Whose side is the RBI on? Have they done a study of all the benefits that we acrue due to the strong rupee? This is just politics!!
RE:Rising Rupee is Pay Raise
by Gunjeet Sra on Jul 26, 2007 09:05 PM Permalink
I strongly disagree with your point of veiw. Today India is benefiting due to the Fundamental universal principal of "flight to quality". Service sector & exports over the last couple of years has given the indians the purchasing power they hold today. IT,ITES,services didnt grow untill $ came in and people in the west thought its the place to get high returns. You try leaveing India on its own without effecient investments and you can see all grwoth stories plung face down in near future.You can surely buy more of boeing with indian rs today but how long will that last, have you ever thought? I dont want to ridicule the efforts in Indians but maintaining these equations is more economicaly essential then political. Country like China also thinks about Dollar equation inspite of being a communist society & you wonder "whose side RBI is on?"
RE:RE:Rising Rupee is Pay Raise
by Natarajan Vijay on Jul 26, 2007 09:37 PM Permalink
The US does not manipulate its currency. Do you want to be like the US or China?
RE:Rising Rupee is Pay Raise
by Hans Solo on Jul 27, 2007 04:24 PM Permalink
India would be better off competiting its neighbour (who had much economic/regional similarities) than equating with US.
How u know US does not manipulate its currency? Then can you please show the M3 supply of dollar? Why this data not in public domain.
Seems like u have some vested interest in exchange rates? Have u bet ur fortunes on Rupee?
The Fed in the US is extremely transparent. Its primary purpose is to control inflation and its primary tool is the fed funds rate. It adjusts the money supply to adjust the fed funds rate. But what is money? Is it M1, M2 or M3? If you look at data from the 90s, monetary aggregates have been all over the place eventhough inflation has been stable. Hence the consensus is that, with all the financial innovation inthe US, monetary aggregates dont make much sense in the short run. The very fact that the fed is able to control inflation by controlling the interest rates is proof enough for me thhat they done manipulate exchange rates. While US politicians are stupid, the fed is controlled by top rate economists, who know that undervaluing you currency is wasting your wealth!!
RE:RE:Rising Rupee is Pay Raise
by Natarajan Vijay on Jul 27, 2007 11:23 PM Permalink
"Seems like u have some vested interest in exchange rates? Have u bet ur fortunes on Rupee?"
My friend, I am an Indian citizen currently working in the US. Hence, my personal net worth measured in INR is decreasing. However, there are about 1billion indians who have bet their fortunes on the Rupee. They have a vested interest in not being robbed by the RBI!
RE:Rising Rupee is Pay Raise
by chirag dixit on Jul 26, 2007 09:05 PM Permalink
Hi Folks, Well, I live in USA, work as a software engg. I agree with Mr. Natarajan, though at personal level my $ value have been hit due to rupees appriciation. But we must understand, that Indian common man will have more purchasing power in global market. More quality goods can be exported and consumed from other market for example here, in US i can buy a good luxary car @ cost of Maruti Esteem in india. So folks we all as NRI should also feel proud that INDIA is doing good. And it's not only INIDIA, its US policy which made their $ depriciated at all other economy, for instance study the Aus$ rate graph compare it against USD, you will understand. INR has still good scope of appriciation, and Govt should take benifit then crying for few exporters. Exportes had earned alot while INR was down, now they have to survive with better quality than cheap supplies.
RE:Rising Rupee is Pay Raise
by ashish sinha on Jul 26, 2007 08:46 PM Permalink
very true. if you grow your value is bound to grow. Strong rupee is a reward for good economy.
Our industries need to realize that with growing economy they need to evolve as well. If they keep on doing whatever they feel comfortable with, without any innovation or improvement, its sure that they shall be wiped out.
A growing economy needs smart industries. Growing Rupee has a lots of benefits to offer to them to help them innovate and grow vividly.
RE:RE:Rising Rupee is Pay Raise
by Amitabh Kumar on Jul 26, 2007 09:05 PM Permalink
Well, I guess we all know that currency appreciates with the growing economy. But don't you think RBI was sleeping for last 3-4 years cause the rupee never appreciated during this period. I guess currency appreciation should be gradual it's impact in international and domestic market can and will be adverse.
RE:RE:RE:RE:Rising Rupee is Pay Raise
by Natarajan Vijay on Jul 26, 2007 09:39 PM Permalink
Amitahb: The currency would have appreciated on its own a long time ago. But the RBI prevented it from appreciating. Now, unable to contain inflation due to the influx of capital, they have been forced to let the currency appreciate.
