These are the two questions I am hearing recently from Indians as well as their US counterparts. No one has answers to it, some say- the best days of Dollar are over and some are hoping for dollar to regain the past glory.
Look at these numbers: Rupee has appreciated roughly 9% in last 6 months alone and Dollar is at the weakest against rupee in last 10 years…!
For an Indian this could mean that he is richer by 9% without doing much and has gained much more purchasing power.
However, as one may imagine, the scenario is not too good for $9 billion Indian IT outsourcing Industry. The U.S. is the biggest market for most Indian infotech companies, accounting for over 60% of the revenues this industry generates by handling back-office and other operations. So the rising rupee is putting a squeeze on earnings and thereby reducing the margins drastically. They have also to fight out other problems like Wage inflation and resource crunch.
To add to it, the stock market has taken the note of this and the stocks have also come down at an average of 5% to 7% in last couple of months.
So, What’s pushing the rupee upward? Foreign investment has been pouring into India. Since January alone, institutional investors have pumped $2.5 billion into Indian capital markets. At the same time, the Reserve Bank of India has been trying to dampen India’s 6.07% inflation, and has raised interest rates five times in past 12 months.
Lets wait and watch this Dollar-Rupee fight :)
In the meanwhile you can vote your opinion in this poll