Whatever the GDP and growth rates of India may be today one must not ignore the fact that all these sky-rocketing figures came with the rise in IT and Outsourcing industries which leveraged the rupee-dollar exchange rates and hedged operational and technological costs.
What the rising rupee is doing is in turn eating into the cost-advantage factor and in turn not doing us any good in the long run. The important difference between China and India is while the former is manufacturing driven we are primarily service-driven. We cannot do what China can do because they are self-sufficient both in terms of manufacturing and agriculture. We have a good position in agriculture but not so in at least basic manufacturing.
We need to retain the cost-advantage for the time being and try to leverage this phenomenon as long as possible because even this is not going to last forever as salaries will keep rising. On the other hand using this advantage we should equip ourselves on the manufacturing side and help make us export surplus in manufacturing, agriculture and services. It is then that we should live rupee free in the market and use our global export share to virtually force all the "developed" countries today to accept rupee as an the No.1/2/3 currency. That should be the strategy. On the other hand all the rupee surges that we see today are nothing but part of microscopic political agenda of the govt. to control inflation and win next election. This is not taking us anywhere.
RE:Illusion
by Manohar on Jun 19, 2007 07:38 PM Permalink
That is a great explanation! so, your point is that, become more self sufficient and then get into the currency game, right!
RE:Illusion
by rajesh singh gulia on Jun 19, 2007 07:33 PM Permalink
I agree with you. IT service sector is the solely responsible for the wide area of modern lifestyle...malls, housing at early ages, cars for the young couples etc....We lack manufacturing advantage. If we loose on this service industry because of Re appreciation, all these luxuries will go with the wind.
