[vivekiny2k]

Originally Posted by tifosikrishna

a stronger ruppee means better buying power, hence salary may rise may not be as high as it is now, but with the same salary we will have a better purchasing power.

ummm, strongER rupee. in international market. what do you purchase from international market?

salaries may go down especially for those who get it from offshoring. unfortunately they have been responsible for most of the inflation (and growth)i in domestic market all this time.

[tifosikrishna]

Originally Posted by vivekiny2k

ummm, strongER rupee. in international market. what do you purchase from international market?

salaries may go down especially for those who get it from offshoring. unfortunately they have been responsible for most of the inflation (and growth)i in domestic market all this time.

when ruppee becomes stronger, our imports become cheaper. for example if oil becomes cheaper to buy, then it translates to lower fuel prices. lower the fuel prices, lower the price of commodities and so better the purchasing power. its a vicious circle...

man, we import more than we export.

[Stig]

Originally Posted by tifosikrishna

when ruppee becomes stronger, our imports become cheaper. for example if oil becomes cheaper to buy, then it translates to lower fuel prices. lower the fuel prices, lower the price of commodities and so better the purchasing power. its a vicious circle...

man, we import more than we export.

I agree. That's the reason UK is very much concerned abt their pound appreciating against the dollar.

More so over, Indian currency also appreciated because banks started selling their dollars as they had to have more CRR because of BASEL II rules. And since Basel rules would have affected every bank, i hope it also contributed to worldwide dollar downfall (assumption)

FDI inflow isnt helping either.

But the good thing is that if a dollar comes to around 20, indians can do globetrotting at a much affordable price..

hey we also became a trillion GPD economy because of this. (replace I by India)

[Samurai]

Originally Posted by Stig

But the good thing is that if a dollar comes to around 20, indians can do globetrotting at a much affordable price..

Come on guys, it is not so simple. If dollar hits 20, our exports will stop and all businesses based on exports will shutdown. Most of us won't have money to go globe-trotting. I'll have to find a new career, let alone a job.

[v1p3r]

Originally Posted by Samurai

Most of us won't have money to go globe-trotting. I'll have to find a new career, let alone a job.

Well, now you know how the manufacturing guys have felt for the last 15 years!

Originally Posted by tifosikrishna

when ruppee becomes stronger, our imports become cheaper. for example if oil becomes cheaper to buy, then it translates to lower fuel prices. lower the fuel prices, lower the price of commodities and so better the purchasing power. its a vicious circle...

Yeah, but have you ever seen those BLOODY oil companies lowering prices in accordance with fluctuating forex rates. Everytime oil goes past some xxx USD a barrel, they cry like their children are starving. When the reverse happens, they HOARD profits like there ain't no tomorrow.

[Mpower]

Originally Posted by Samurai

For our export driven economy, low rupee value against major currencies is a good thing. If rupee keeps getting stronger, all the IT/BT/ITES/Textile jobs will quickly leave our country.

Weak Rupee => Good for Export, bad for Import
Strong Rupee => Bad for Export, Good for Import

Unless we have very strong domestic market for our products, we are better off with weak rupee.

Precisely. This is the reason China does not float the Yuan so that their products are always cheap in the international market.

I believe INR is partially floated and USD is fully.

[lurker]

Originally Posted by Samurai

For our export driven economy, low rupee value against major currencies is a good thing. If rupee keeps getting stronger, all the IT/BT/ITES/Textile jobs will quickly leave our country.

Weak Rupee => Good for Export, bad for Import
Strong Rupee => Bad for Export, Good for Import

Unless we have very strong domestic market for our products, we are better off with weak rupee.

Accha...then China with 8 Yuan : 1 Dollar must be having a tough time on the export front .. no ?

[lurker]

Originally Posted by Samurai

Come on guys, it is not so simple. If dollar hits 20, our exports will stop and all businesses based on exports will shutdown. Most of us won't have money to go globe-trotting. I'll have to find a new career, let alone a job.

Again dodgy information ! If the cost of commodities that go into export remain low and rupee remains strong then you will still end up making profits and globe-trotting.

IT/VITY can't hold the entire country to ransom crying that their world will collapse.

[typeOnegative]

Originally Posted by Wimwian

It's still true to a certain extent... it's not controlled directly, but RBI controls it through forex market interventions... FDI inflows have been increasing dollar supply in the market which the RBI was sweeping up by selling rupees till about feb-march, thereby preventing the rupee from appreciating... however too much rupee supply was fueling inflation and RBI has since stopped under government pressure... which is why rupee is appreciating right now.

Where's Seb Morris when you want him? I have not seen any move, covert or overt from the RBI wrt forex in the recent past - maybe I am wrong. Most moves have been on domestic monetary policy. And the rupee has been appreciating much before the RBI intervened.

[typeOnegative]

Originally Posted by lurker

Accha...then China with 8 Yuan : 1 Dollar must be having a tough time on the export front .. no ?

No. Do not go by absolute rates. Also how much does an average Chinese worker get vis-a-vis an average American or Indian one? Do the math from there. What Samurai is pointing out is a rule of thumb. The actual impact on the Chinese will come from the way costs are managed at home.

[typeOnegative]

Originally Posted by vivekiny2k

ummm, strongER rupee. in international market. what do you purchase from international market?

Better buying power if you are tourist.

[wiking]

Originally Posted by lurker

Accha...then China with 8 Yuan : 1 Dollar must be having a tough time on the export front .. no ?

No idea.. but Japan with ~130 Yen : 1 Dollar has a very good time with exports

[Samurai]

Originally Posted by lurker

Accha...then China with 8 Yuan : 1 Dollar must be having a tough time on the export front .. no ?

Is that how you think it really works? Then I don't know what to say. By that logic UK or Gulf countries can never export anything to US since their currency has an absolute value above that of USD. The absolute value of the currency doesn't mean much. What you can buy with that currency is the key, what they call as purchase power. If I can buy an item at 2 dollars (say 80 rupees) in India and the same item at 1 dollar (say 8 yuan) in China, then it doesn't matter if Yuan is stronger than Rupee.

Originally Posted by lurker

Again dodgy information ! If the cost of commodities that go into export remain low and rupee remains strong then you will still end up making profits and globe-trotting.

Ah! now apply this logic to your first statement above. China is doing better than us even with 8Yuan:1USD simply because their cost is much much less than us.

Now let's consider rupee jumps from 40:1 to 20:1 against USD over an year. To maintain the same cost edge, all ours domestic prices have to go down by half. Will that happen? Nope. Since exports are highly price elastic, we will lose export contracts much before domestic prices start reducing. Then it is too late.

All this is from my personal experience as an exporter. If this is all dodgy information, I'd like to hear your argument, how rupee dollar ratio at 20:1 going to make our life easier.

Originally Posted by lurker

IT/VITY can't hold the entire country to ransom crying that their world will collapse.

I am not familiar with this VITY industry, never even heard of it. Regarding IT, it is sad when people think IT doesn't count much towards India's wealth/growth. BTW, currency rates affect all our exports, not just IT. No country can survive without healthy exports.

[lurker]

Originally Posted by Samurai

The absolute value of the currency doesn't mean much. What you can buy with that currency is the key, what they call as purchase power. If I can buy an item at 2 dollars (say 80 rupees) in India and the same item at 1 dollar (say 8 yuan) in China, then it doesn't matter if Yuan is stronger than Rupee.

And isn't this a 180 degree turn from what you mentioned earlier ?? Now you are saying that exports WILL NOT COLLAPSE if rupee is stronger, what matters is purchasing power. And the cost at which the industries procure services and commodities, capital to finance their exports. If these costs can be kept low then price of rupee vs dollar will not matter but on the other hand will reign in inflation as well.

What do you think is a better solution. Devalue rupee or manipulate price of inputs like China ??

Originally Posted by typeOnegative

No. Do not go by absolute rates. Also how much does an average Chinese worker get vis-a-vis an average American or Indian one? Do the math from there. What Samurai is pointing out is a rule of thumb. The actual impact on the Chinese will come from the way costs are managed at home.

Aha..so now you are referring to cost of commodities and inputs viz land, labour, capital etc of whose price which can be manipulated then rate of rupee vs dollar doesn't really matter.

[typeOnegative]

Originally Posted by lurker

Aha..so now you are referring to cost of commodities and inputs viz land, labour, capital etc of whose price which can be manipulated then rate of rupee vs dollar doesn't really matter.

Theoretically yes and no. It all boils down to whether you can make a sustainable profit. For example you can sell to the US even if the current rates are reversed and still make a profit. But ask yourself how practical it is in the first place. China has had a low cost structure right from the start. It is tougher for us - will you like a pay cut for instance?

As pointed out by Samurai, by the time we realize that the exchange rates are hurting us, it might be too late.