pondering life….

life thru my eyes..

Archive for October, 2007

Strong Rupee Strong India…

Posted by Madhuresh on October 14, 2007

This is the summary of a paper that me and my freind prasenjit have written fo the finance samathi…We spent a lot of time doing our research..though we didnt qualify for the final round but i felt we did fairly well seeing the amount of time we had…..anyways this is much of studies but we are not from finance background hence have made it simple and easy to understand…u can get full paper on demand….Here it goes
currecny rates.

  A strong currency is a quick indicator of a country’s growing economic muscle. The Indian economy has always been perceived as a manufacturing economy with the growth being driven by keeping the rupee at a low, but unlike other Asian counterparts the Indian economy largely depends on domestic consumption to maintain an equitable growth. The impact of the rising rupee on the affordability of basic goods would be significant, especially by those at the bottom of the purchasing power pyramid. By doing so, it would make growth more equitable. Eventually in the long run the equitable distribution would help in making growth fair and without partiality.

             Drivers of domestic market are agriculture, construction and transportation. A strong rupee makes for cheap imports of petro-stock for fertilizer plants, coking coal for steel plants and petroleum for vehicles. These three becoming cheaper, is good news for Indians. The discourse on the merits and demerits of the strong rupee has been informed and driven by India’s export competitiveness. Detractors of the strong-rupee policy could argue that some export competitiveness would be lost in a mercantilist world where India’s rivals could increase their market share by keeping their currencies undervalued.

            However the Indian economy depends on domestic consumption to sustain equitable and widespread growth. Hence those that are dependent on the weak rupee for their competitiveness should re-engineer their export businesses soon. The rupee’s rise is the result of India’s growing ability to attract global capital. While this creates problems for some companies that earn most of their revenues in dollars, it also creates opportunities for Indian firms by making it less expensive for them to acquire overseas assets. The rupee rise also helps to tame inflation, India not only imports oil but also a number of other things like wheat etc. It is better if government does not enter and provide support, as some correction should take place by the end of next year as U.S. expenditures outside decrease. Hence we say strong rupee is good for India’s economy.

credit:-we thank CCP technology for it wonderfull support……………….


Posted in life at IPE | 2 Comments »