Lot of people don't understand the devastating effect of rupee depreciation on common man.
In mathematics they call it boundary condition analysis. Similar approach could be used to find the appropriate value of Rupee.
For a theoretical case : Lets Assume 1$ = Rs. 1000
Now practically all our goods would be exported to outside world. Exports 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 we get in India would get exported.
What effectively happened is, we are giving all our minerals and work force of every Indian man and eomen to the betterment of people outside India (like USA). What do we get for that?? USA will print their own currency and give it to you.
In bottom line, It is like 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.
Now You can't export any thing.
*Unless* the product you export is really really needed by the importing country.
Currently USA is importing like mad. They run huge deficit. Why do they do that??
Importing improves ordinary people lives. Now exporters of the country need to im
RE:Thought Experiment ...
by Nishant T on Jul 26, 2007 10:38 PM Permalink
That analysis is too one sided. Do you know ill-iffect of too much importing..well, for once the trade deficit will be too much, which will make us dependent a lot on foreign aid, good will etc. Too much import will cause many industries to be unviable..they will close, jobs will be lost..that will have even more bad effect overall. Why is China not degrading its currency..even after US pressurinsing it to do so.. I am not an expert on this subject, but know for a fact that there has to be a balance. And free market will ensure that balance..
RE:Thought Experiment ...
by Ajay on Jul 26, 2007 09:40 PM Permalink
Let Indian companies charge the same rate as american companies , the so called myth of Quality Indian consultants will be history within 1 year. I am an independednt consultant and WIPRO/TCS/InFOSYS charges less than i do. With Re at 25 to a $ i'll cream them anyday.
