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Old 17th May 2007, 13:07   #76
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1. My basic argument is not wrong, only my fact. There is no reason to be happy that India has a trade deficit.

2. If rupee becomes stronger, it encourages more import & less export, and our trade deficit only increases.

3. On the other hand, with less exports, we will have less dollars to spend, therefore dollar will again rise against the rupee there by completing the cycle. This is assuming RBI keeps their hands off.

.
1. We were discusing your argument , based on facts as seen by you, which turns out to be wrong.

According to your earlier post Countiries who import much more than they export, will be happy to see their currrency appreciate wrt other strong currencies. I just pointed out that India very much falls in this category and there should be no heatrburn if the currency appreciates , as per your own statement. Question of my happiness doesnot arise at all and IMO is immaterial to what is under discussion.

Ofcourse there will be pockets of economy who will be pinched by this move but in a free market economy , no good enterprise can hope to survive on any artificial crutches....


2. Not Universally true , Germany with a strong Euro as currency compared to most others, still exports much more than it imports. Economy of Germany - Wikipedia, the free encyclopedia .

3 there are other ways a country gets a foriegn exchange as wel.. FDI, remittances etc..

Last edited by w 12 : 17th May 2007 at 13:11.
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Old 17th May 2007, 13:14   #77
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It has happened for ages. But what is the alternative? Kill 'em all? I have seen greater harm being done even in the era when there was no "IT/VITY".
When there was no IT/VITY there were other groups.

Bombay Club ?

Rahul Bajaj making obsolete autos and asking govt to protect him. lol

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Competition can do that. In the case of retail, it would be great if there are three to four big names playing the game. Then we all benefit.
What happens if they cartelize too ?

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Caution has held back India for a very long time. Move without undue haste but don't wait for the entire world to rush by you.
This advice has been given to India since 80s, move on or you shall be bust. The people rendering this advice were most MNC's who were not able to move on their terms because our political masters were beholden to the Bombay Club-type cartels.

US politicians used to visit India in the summers and ask India to move or go bust.

We must move, but on our terms. Avoiding traps setup by MNC cartels and Bombay Club cartels and nexus with corrupt politicians who claim to do good for all.

Rupee can't be manipulated to serve narrow interests, who have given the Finance Minister appropriate consideration. It must move in the interests of the nation and the entire nation must seek accountability for issues that affect their livelihood. Middle-Class must rise and seek their pound of flesh.

This happens in India only through blackmail.
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Old 17th May 2007, 13:24   #78
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An interesting article on the subject by Paranjoy Guha in TOI ,

LEADER ARTICLE: Sabse Bada Rupaiya-Editorial-Opinion-The Times of India
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Old 17th May 2007, 13:27   #79
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When there was no IT/VITY there were other groups.
Bombay Club ?Rahul Bajaj making obsolete autos and asking govt to protect him. lol
That was what I was pointing out.

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Originally Posted by lurker View Post
What happens if they cartelize too ?
Will they?

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Originally Posted by lurker View Post
This advice has been given to India since 80s, move on or you shall be bust. .... US politicians used to visit India in the summers and ask India to move or go bust.
Fair enough.


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Rupee can't be manipulated to serve narrow interests, who have given the Finance Minister appropriate consideration. ...
This happens in India only through blackmail.
I think you are too idealistic. Besides, the Middle class are not the only stakeholders in India.
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Old 17th May 2007, 13:30   #80
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In my earlier post I have taken a macro data spanning over 40 years.
That data neither proves my side of things nor yours.
As for the adapting with the times. The current trend of more dollars for the Rupee seems more beneficial to me, hence my line of thought.
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Old 17th May 2007, 13:58   #81
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Originally Posted by w 12 View Post
1. We were discusing your argument , based on facts as seen by you, which turns out to be wrong.
Only the fact, not the argument.

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Originally Posted by w 12 View Post
According to your earlier post Countiries who import much more than they export, will be happy to see their currrency appreciate wrt other strong currencies.
I didn't say that, please don't twist my words to fit your logic.

This is what I said:
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Countries with trade deficit (more import than export, which is a bad thing) hate their currency getting weaker against other major currencies. That reduces their buying power. That is the case with USA.
They hate their currency getting weaker, that is not the same as saying they are happy to see their currency appreciate. Then their exports will get affected. Since India too has trade deficit (as pointed out by you) this will apply to India too along with USA. We don't want our currency getting any weaker. But do we want it to appreciate? Not really, our exports will get further weak.

If I say I hate to get thinner, doesn't mean I am happy to get fatter. I just want stability.

Last edited by Samurai : 17th May 2007 at 14:05.
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Old 17th May 2007, 14:29   #82
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Originally Posted by Samurai View Post

1.They hate their currency getting weaker, that is not the same as saying they are happy to see their currency appreciate.

2. Then their exports will get affected. Since India too has trade deficit (as pointed out by you) this will apply to India too along with USA. We don't want our currency getting any weaker. But do we want it to appreciate? Not really, our exports will get further weak.

3. If I say I hate to get thinner, doesn't mean I am happy to get fatter. I just want stability.
1. IMO Global economy is not like a stagnant pool of water , where we can mandate the exchange rates we are comfortable with. There are too many dynamic variables and India is not an insulated economy anymore.With the Indain economy expected to login 8% + growth in next few years and American economy expected to go down further from the current 3.3%, it will surely have an impact on the exchange rates as well.

Days when some sarkari Babu sitting in delhi fixed the exchange rates and kept it stable , irrespective of what is happening to the economy are thankfully over.

2. Please see the linky on Germany. It is not necessary that a strong currency affects exports all the time. Innovative products and services also count.

3. Absolutely. But it is better for you health , if you stabilise your weight after you reach your ideal BMI . If you are underweight and stable at the same time, it is not exactly healthy IMO. But these are purely my opinions and I am sure many will disagree.
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Old 17th May 2007, 14:35   #83
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Hmmm... what a solid free for all this one is proving to be Waise I am enjoying this.

By the way lurker, your points may have some validity buddy but they are not necessarily the absolute truth or entirely correct. Because inspite of all you loathing for the "IT/VITY" sector the fact remains

> India earns a substantial part of its forex from this industry. Anything that hurts this industry will immediately bring down the export earnings substantially. This in turn will affect the BOP scene. That is one thing no government ever wants.

> If you leave IT aside, india's traditional job sector has always been manufacturing. Now we are becoming internationally competitive not only price-wise (that we always were) but also in terms of quality. Manufacturing is reviving big time. Exports are once again going up. The devaluation of currency will immediately make this sector run for cover. All those investments for greenfields manufacturing, setting up fabs, ancilliary components sector etc will immediately vanish.

> A loss of competitiveness in the world market in turn will mean that investor confidence in the India success story will also ebb to a large extent. All the Forex reserve that helps us rest in peace now will evaporate before we realize as the FIIs will immediately pull out.

> A huge chunk of Indians are now either directly or indirectly employed by these industries. Anything that affects these cos. will immediately affect the millions working in this field. This in turn will affect the economy of the country. Remember some of the highest spenders in the country are linked to these cos., one way or the other.

> A downturn in economy will affect the demand for everything else which will suck everyone else who have nothing to do with the IT sector. Ultimately the whole country will land up in a financial mess.

> The hundreds of graduates that come out in the market today used to just loitter around and kill time on the neighbourhood pan shops even a decade back. Today even a non-graduate (who arguably has no other proven skills) also finds a job in one of those BPO cos. (probably your VITY part of the coupling... we call it ITES) and makes around 10-15k. You think they will agree with the ramifications wherein they may have to go back to the old story from a decade back?

Why did I write all these? That is because mate I think either you have a tremendously skewed idea of this country's goals and the direction it is taking or else you are too idealistic. Agreed that politicians do pander to the whims of those big corporates, agreed that everyone (or most) have a few of their own rods in the fire and hence want to stoke it. However what is happening in general or what so many others here are espousing is not because of some grandiose plans or for that matter because some handful of corporates or politicians have them all blinded to the facts. Aam janta is cleverer than that. Its because when there is a collective good involved and when you have got a good thing going sometimes you do need to wink at the lesser evils.

Finally, I fail to see why you want the rupee to appreciate? I mean your personal issues against a weaker rupee is? At least I counted out so many pluses for a weaker rupee. Except for a handful of importers I can not see anyone gaining much out of it. And I would rather have the thing manufactured here and exported to the world and consumed locally as well rather than importing it from elsewhere.

If it is the inflation that worries you there are other means to achieve that besides a stronger rupee.

Last edited by Zappo : 17th May 2007 at 14:45.
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Old 17th May 2007, 14:52   #84
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Just read few articles on the topic by economists and they point out following:
  1. The currency has appreciated from ~50 Rs/dollar to ~40 Rs/dollar in last few years. In spite of that, economy is still booming. IT/ITES is still growing, though margins may have shrunk by 10%. FDI is still flowing in the country.
  2. Convertible currency rates are decided by market as opposed to government controlling it. So, no point forcing market against it. It will fluctuate and stabilize. No one foresees currency appreciating to Rs. 20/dollar as of now. We want benefits of liberalization, so we should be ready to face these problems, which come with open economy.
  3. It costs money for RBI (and tax payers) to absorb the $ inflow, by way of losing interest on this Forex reserve.
  4. As already discussed at length, it helps importers as well and keeps inflation in check.
  5. I didn't understand this last point, but these guys talk about Capital Control rather than currency control. It went zoom over my head If someone understands it, please explain.
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Old 17th May 2007, 15:14   #85
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Infosys chairman will take the easy way out, he will stop singing national anthem and will escape to another country. But the rest of the professionals might not have it so easy.
Why do u think they have started offshore centres in China etc (Which I think was a loss making venture). Thats their Plan B in case Rs/$ goes belly up.

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I'm with you Samurai..We need to know the secret of reducing our input costs dynamically with the fluctuating Rupee

Then maybe some fellow citizens might not be insulted!!
Or stay local and go looking for Indian customers. Voila, no exchange rate fluctuation. Of course, Easier said than done...The World is flat and all that jazz :(

Also. so far nobody has analysed as to the reason why rupee is going up against the dollar. Lets forget about the effect for some time and worry about the cause.

Last edited by spadival : 17th May 2007 at 15:33.
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Old 17th May 2007, 15:44   #86
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Why do u think they have started offshore centres in China etc (Which I think was a loss making venture). Thats their Plan B in case Rs/$ goes belly up.
how will China make a profit when 1 dollar: 8 Yuan and they have to pay more than slave labor wages that they pay their captive labor recruited from villages making toothbrush, shoes, hairclips for Walmart for their software programmers.

How will China manage this when India can't even manage with 1 dollar: 40 Rupees.

Let us consider that price of eggs, pulses and wheat in India & China are roughly the same.

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> India earns a substantial part of its forex from this industry. Anything that hurts this industry will immediately bring down the export earnings substantially. This in turn will affect the BOP scene. That is one thing no government ever wants.
Who prevented India from taking the manufacturing route earlier. We till date do not even have a single fab manufacturing memory chips in our country that caters to commercial needs. China has dozens and even tiny Israel and Malaysia have a few. This has given a boost to their manufacturing industry.

During 80's just before the dot com revolution, Intel or IBM head (I am not sure which one ?)visited India and applied permission from Indian Govt to open a fab. A sarkari babu threw away the paper stating this would create a national security risk or something. Then they went to China with their fab plan. This put paid to our manufacturing plans from very start. Belatedly in 2006 AMD/Sem India has launched some fab manufacturing facility in Hyderabad.

Who will pay the opportunity cost for this blunder ??
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Old 17th May 2007, 15:47   #87
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Also. so far nobody has analysed as to the reason why rupee is going up against the dollar.
Liquidity is being dried up as an anti-inflationary measure by the Govt. Inflation hits the poorest of the poor who survive on wafer thin margins, these are also the people who have Election ID cards and cast their votes. When rupee supply dried up as a result of interest rate hikes, dollar fell down due to oversupply.
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Old 17th May 2007, 15:53   #88
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1. IMO Global economy is not like a stagnant pool of water , where we can mandate the exchange rates we are comfortable with.
Why do you extrapolate everything I say? I say Ili, you hear Huli. When I say hate to depreciate, you hear happy to appreciate and when I say stability, you hear stagnant.

To automobile terms, when somebody says his car is very stable at 140kmph, it doesn't mean it is stagnant at 140kmph. It means it is steady and under control.

Before you take the term under control out of context, let me remind you I am all for free market. I don't want a sarakari babu fixing rates like China. I have cried about raising rupee and how it affects me, but I never said government should control this. But I still got accused of ransoming the country though.

When I hope for steady rate, I am only referring to short term. If dollar changes from say 42 to 41 over a year, or 42 to 32 over a decade, it wouldn't bother me. Even if it is in the other direction. At that speed everything else catches up and the effect is not drastic. It is the drastic changes that spoil the party, like 4 points in 2-3 months. I make a sale, by the time I get the money I have lost 5% of it. These kind of drastic appreciation or depreciation can make and break plans or even businesses. Since the begining of the thread I have been saying this, the absolute rates doesn't matter, it is the purchase power and forex variations that matter.


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2. Please see the linky on Germany. It is not necessary that a strong currency affects exports all the time. Innovative products and services also count.
Who said no? If somebody has unique or highly popular products/services, they can export it even with higher price.

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3. Absolutely. But it is better for you health , if you stabilise your weight after you reach your ideal BMI . If you are underweight and stable at the same time, it is not exactly healthy IMO. But these are purely my opinions and I am sure many will disagree.
BMI is a misleading indicator of health. It doesn't apply to me since I am muscular. Body Mass Index Misleading Indicator Of Health
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Old 17th May 2007, 16:47   #89
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Who prevented India from taking the manufacturing route earlier. We till date do not even have a single fab manufacturing memory chips in our country that caters to commercial needs. China has dozens and even tiny Israel and Malaysia have a few. This has given a boost to their manufacturing industry.
Nobody did mate... just as nobody goaded india into the IT/ITES field. Its all about individuals and their calibre. Indian manufacturing sector was happy doling out substandard products to the local market, shielded by the socialist norms. They never felt the need to be competitive. They missed the bus. On the other hand the knowledge industry people were smart to spot the chance when it was there and today we are reaping the benefits of it.

However today we have started developing our manufacturing skills as well and world has started realizing that Made in India does not necessarily translates to poor quality stuff. In fact chinese now have the distinction of churning out cheap and poor quality stuff by loads.

And yet, they are now trying to catch up in the knowledge industry as much as we are in manufacturing. However your logic of "Who prevented India from taking the manufacturing route earlier" sounds rather churlish. Just because they are doing it now you are saying we do not care what happens since you are a late starter. Also, I do not think a chinese will ever say 'Who prevented China from taking the software route earlier.'. They are competing and competing hard... and trying to make a match out of it.

Just as much china has dozens of fab and even "even tiny Israel and Malaysia have a few" we have 1000s of software firms and big ones by the dozens. This has given our knowledge industry a boost. Why should I only look at the glass being half empty? Why not the fact that the other half is full?
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Old 17th May 2007, 17:08   #90
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Originally Posted by lurker View Post
US politicians used to visit India in the summers and ask India to move or go bust.
and

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During 80's just before the dot com revolution, Intel or IBM head (I am not sure which one ?)visited India and applied permission from Indian Govt to open a fab. A sarkari babu threw away the paper stating this would create a national security risk or something.
Hmmmm .... Damned if you do. Damned if you don't.
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