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Indian Rupee has surged more than 11% this year. Should Indians Rejoice or should they be unhappy ?
Under normal circumstances the answer to this question should not be too tough. But for countries like India and China, whose Economy and GDP are highly dependent of exports, it is a tough call.
However, what about individuals, what should they make of this rise. Again a tough call.
Many like me, who are in IT Industry working in US, are not too happy. The unhappiness is easy to figure out.
I now need to send approx 15% more to pay the installment of my home loan in India. This is the case of majority of Indians who plan to go back to India. The same is with small exporters who make a living by exporting merchandise to UK/US. They get paid in dollars and Euros. And when dollar loses its value by 15%, it is a major loss to these small exporters.
Infact some of these small time exporters operate on margins of 8 to 10%. So, now they end up doing business in loss !
Who is to blame for this rise ?
As BusinessWeek puts it,
Blame it on India’s red-hot economy. After decades of puttering along at about 3.5% a year, the country is averaging growth of 9% or better annually, powered by a vibrant info-tech services sector and exploding consumer demand. What’s more, India is awash in foreign money: $25.2 billion poured in during the fiscal year that ended in March, up 25% from 2005, attracted by deregulation of sectors such as retail and real estate and a roaring stock market.
The other big disadvantage is that India is loosing the competitive edge to other Asian countries like China, Phillipines, Korea, Taiwan and Singapore. Everything in India has become costly by 15% for foreign buyers, and that is a huge margin. Some volume businesses operate on lesser margins than these. They have to either stop doing business with India or Indian exporters will have to bear the losses caused due to Rupee appreciation.
Few economists predict that this could lead to job losses for up to 200,000 people in small export business like spice , producers of brassware and textiles. And these small and midsize enterprises contribute 60% of India’s export earnings, according to the Associated Chambers of Commerce & Industry in India.
Last few months I have been following the rupee move consistently and have tried to find answers as to where is this rupee going stabilize. Like most of them, I have not got the answer. Infact, I doubt if anyone could tell you.
I had setup a poll few weeks back to see what the readers have to say about this: Here are the latest results of that.
Total of 198 readers have responded till now – the opinions are pretty divided
41% think Rupee will stay below 40
23% think Rupee will go above 43 and stay there
37% think Rupee will stay between 40 and 43
You can make your own judgement based on this.
I’d be interested to hear if you know the future of Rupee :)
If you want to participate in the poll, go ahead: (RSS/ email readers click here)
I think it needs a really good answer:
China devalues its money to build infrastructure and uses excess cash to buy oil and mineral resources so they are securing a future and building for the future.
India does nothing with the extra cash we buy foreign weapons at blown up prices essentially export doesn’t really work for us. From my point of view we are essentially raising the cost of living for the common man and using the cash to buy up few fancy electronics and build few glass buildings but otherwise nothing.
To say China has cheap labour is a joke the percapita income in the chinese cities is much much higher than India and almost equivalent to some of the not so rich european countries like spain. The per cap in rural areas is lower but so is the cost of living.
I think it would be good because our IT industries are so inefficient they can hardly compete with some French companies inspite of the cost advantage.
Technically we are so backward
It will force us to rethink the cheap labor and zero risk way of doing things.
We lack innovation or real product building expertise