[tsk1979]

I read a report somewhere that if dollar rises to 48-49 rupee level it will be bad for economy.
Even if it falls to 39-40(current) its bad for economy.
The optimal value is around 43-44 according to many analysis.

India has been hoarding dollars for almost 20 years now, and this does not auger well.

I am surprised to see comments which say "Falling dollar means stronger rupee".
Falling dollar means weaker dollar, not stronger rupee.Now if rupee was appreciating against Euro/Yen at the same rate, it would mean stronger rupee.

As long as inflation in India is greater than inflation in other countries it means that the rupee is losing value faster than others.

That way look at the Rouble. If we use rouble as benchmark, rupee has grown manifold stronger, not 15%.

[hondadude]

Originally Posted by Samurai

That's not a good example. They have the unique advantage of having common currency across most EU countries, where they do most of their goods exchange. Give me an example of a country with strong currency and is a net exporter. That would be a interesting scenerio to study.

Dollar is week now but even when it was strong wasn't US a net importer ?

This applies only if we are paying using dollars. And how is this dollar coming to us, by exporting to US. But the US exports are coming down due to the dollar slump, which means we won't have enough dollars to pay the petrol bill.

Another way we get dollars is when US companies invest in India. Infact most of our dollar reserves comes from that.

Actually India has been hoarding huge dollar reserve for long, this sudden drop in dollar price can't be good for the economy.

The hoarding is primarily the result of investment by FIs and other MNCs and is not necessarily intentional. A lot of money has been flowing in India.

Please explain why drop in dollar price can't be good for the economy ?

[Technocrat]

Please explain why drop in dollar price can't be good for the economy ?

Because it will widen the gap between Export & Import & as discussed before higher Imports than Exports is certainly not good.

[raul]

The sub prime mess is taking all banks down and they being the major spenders on technology all Indian firms are going to be affected. And this is only from only the losses they have disclosed, the real figures behind clever accounting could be much larger,

For most technology companies, be it product or services the banking and financial sector is by far the largest customer. There is the regular spending, the upgradation and new projects and technology. The second & third component is going into cold freeze now.

This is a 3 year downcycle at least. You will soon start seeing droves of articles by tech honchos, analysts, busybodies and media about how companies should not stop spending on technology to maintain their competitive advantage, especially in a downturn bla bla by PR from technology companies.

We are already seeing paycuts, as far as India is concerned demand in the economy is definitely going to be hit and this will affect a host of industries and sectors from real estate, auto to more.

I feel the whole Indian boom is fueled by IT and BPO because of the sheer number of people who have more purchasing power and spare income. There is debate about whether the pay is fair, should be more, but in the Indian context its by far the first industry to share a larger proportion of income with employees. That's got our economy ticking.

I go to malls, and I see so many people working in decent conditions, people who would otherwise be working in the unorganized sector and we know how bad conditions and pay is there or not at all. This is an example of the trickle down from the IT economy. Let's hope for the best.

[hondadude]

Originally Posted by Technocrat

Because it will widen the gap between Export & Import & as discussed before higher Imports than Exports is certainly not good.

And why will it widen the gap between export and Import ?

[Samurai]

Originally Posted by hondadude

Dollar is weak now but even when it was strong wasn't US a net importer ?

They still are I think. They were again in an unique situation. The only foreigners who will buy Indian rupee are people who want to spend it in India. If country X wants to buy something from country Y, they won't use Indian rupee, but they might easily use dollars. Even countries that don't buy anything from USA (like Cuba), will still buy dollars in open market or accept dollars for their products and services. And then they can use it for imports from various other countries. Since USD is accepted as common currency by most countries, everybody buys it. And US is the only producer and exporter of US dollars, the currency of the world. If you take that into picture, US is net exporter too (of currency).

Now that euro has emerged as an alternative world currency, the monopoly of US$ as a common currency has been affected. As more and more countries start using Euro for bilateral trade, it further reduces demand on US currency causing drop in dollar prices. This will really force US to reduce their imports, the outsourcing, etc. All the world economies and industries that are depended on US business will be really hit. Damn, I am scaring myself now.

Originally Posted by hondadude

Please explain why drop in dollar price can't be good for the economy ?

Because our dollar reserve lost 12% in value in the last one year. Because most of the Garment, IT and depended industries are tied to US economy either directly or indirectly.

[spadival]

Every single tax payer in this country will be paying a price for maintaining the Rs vs $ rate at its current level. Its a long story on why..Somebody in RBI/Govt came up with the bright idea of buying bucket loads of $$ to control the exchange rate. Then to neutralize the excess liquidity, RBI floats Market stabilization bond.. All very nice, except the interest on these bonds are paid by the govt.. i.e you and me

[hondadude]

Originally Posted by Samurai

Now that euro has emerged as an alternative world currency, the monopoly of US$ as a common currency has been affected. As more and more countries start using Euro for bilateral trade, it further reduces demand on US currency causing drop in dollar prices. This will really force US to reduce their imports, the outsourcing, etc. All the world economies and industries that are depended on US business will be really hit. Damn, I am scaring myself now.

We have been hearing of this doomsday scenario for years now. Can it happen ? Yes. Is it likely to happen in short/medium term ? I don't believe so. US economy, while not growing is big enough to prevent that and most of the other countries in the world have parked their money in Dollars and now have vested interest in protecting dollar as well.

For this doomsday scenario to become realistic, other countries have to buy more goods than US and have to use Euros. US can and will arm twist other countries who trade with US to not use Euros. Think about it. Will India use Euros to buy Oil considering US India trade deficit is more than 6 billion USD in India's Favour ? Similar situation exists with other countries.

There were theories that Iraq war was primarily because Saddam decided to use Euros to sell Oil.

Because our dollar reserve lost 12% in value in the last one year. Because most of the Garment, IT and depended industries are tied to US economy either directly or indirectly.

Take a look at the trade between India and US. I don't see any slowdown in imports to US. The data is from the perspective of US.

If the dollar is going down against all the currencies of the world, it doesn't make our imports costlier vis a vis those currencies which are appreciating against dollar as well. There is of course a matter of Chinese currency artificially pegged against dollar but that is resulting in more dollars flowing to China and sooner or later that's gotta change as well.

[vivekiny2k]

Originally Posted by hondadude

We have been hearing of this doomsday scenario for years now. Can it happen ? Yes. Is it likely to happen in short/medium term ? I don't believe so.

you are right, if you take into account only the falling dollar. but another factor that you ignore is 10-15% hike in salaries in india every year. the limit when offshore labor costs more than local labor (including infrastructure to support offshoring) will aproach faster if the hikes continue, hence counter measures taken by the employers.

US economy, while not growing is big enough to prevent that and most of the other countries in the world have parked their money in Dollars and now have vested interest in protecting dollar as well.

that's a cruelly funny complexity of economics.

For this doomsday scenario to become realistic, other countries have to buy more goods than US and have to use Euros. US can and will arm twist other countries who trade with US to not use Euros. Think about it. Will India use Euros to buy Oil considering US India trade deficit is more than 6 billion USD in India's Favour ? Similar situation exists with other countries.

Forget about arm twisting if US has no economic power.

Take a look at the trade between India and US. I don't see any slowdown in imports to US. The data is from the perspective of US.

well, even if imports remain the same, the margin goes down for indian companies, we already have discussed that.


and trust me, all the countries who have been storing dollars for a long time with their hard earned money will be really disappointed. US has always encouraged borrowing and spending, and it continues to do so, one day it will file for bankruptcy and all economy will go haywire

[hondadude]

Originally Posted by vivekiny2k

US has always encouraged borrowing and spending, and it continues to do so, one day it will file for bankruptcy and all economy will go haywire

It is the other way round actually.

All the countries are lending money to Americans so that they can spend and as they do that they buy stuff from other countries and they benefit . This has been going on for a long time now.

[Technocrat]

Originally Posted by hondadude

And why will it widen the gap between export and Import ?

Because Imports will be cheaper & exports expensive.

As per today's TOI Exports are groing at 21.7% & Imports at 25.9%

This pic will give a better picture.

[finneyp]

500 TCS employees asked to leave!

500 TCS employees asked to leave

I think this is the first time a Indian IT Co resorted to such mass layoff!

TCS is already in bad books of most of the IT professionals, with this move TCS will have a tough time to get people on board in future!

[Samurai]

Originally Posted by finneyp

I think this is the first time a Indian IT Co resorted to such mass layoff!

Nope, in 1991 HCL fired 600 people sending shockwave into the corporate world.

Originally Posted by finneyp

TCS is already in bad books of most of the IT professionals, with this move TCS will have a tough time to get people on board in future!

And yes, HCL suffered the same fate for many more years until that memory faded.

[lambuhere1]

Originally Posted by finneyp

500 TCS employees asked to leave!

500 TCS employees asked to leave

I think this is the first time a Indian IT Co resorted to such mass layoff!

TCS is already in bad books of most of the IT professionals, with this move TCS will have a tough time to get people on board in future!

Heard some of it has happened in Calcutta ! No confirmations yet

[spadival]

This kind of firing has happened (albeit quietly) before in TCS when I was there (around 200 people.. cant remember the year).

I am ok if this number includes top level execs and middle management as well.. But alas, only the poor programmer at the bottom of the pyramid gets fired. In that sense, I appreciate American co's like GE.. they tend start the firing from the top starting with the CEO..