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Fall of the rupee
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Bikky Khosla | 18 Jun, 2013
The rupee has been facing crisis for quite some time now. Last week, the currency hit a new record-low of 58.95 against the US Dollar, and although later it recovered to some extent buoyed by RBI's intervention in the forex market, Fitch's upgrading of India's credit outlook, and assurance from the government of steps to curb further fall, the gain was not enough to prevent it from registering its sixth consecutive weekly loss. During the current financial year up to June 14, the rupee depreciated by 5.8 percent.
What significance does this hold for our exporters? Beyond doubt some exporters will benefit from the ongoing rupee crisis. The sector has been facing demand slump in the global markets, and now with such a depreciation it is expected that our exports would be more competitive in the global markets, and this will ultimately lead to export growth. In fact, some media reports have already noted that some sectors like apparel and agriculture are rejoicing at the fall of the currency.
But this is not the complete picture. Although the weak rupee may bring some short-term gain to the export sector, currency depreciation can't do any real good to an economy, and definitely not when current account deficit (CAD) is so bad.
In addition, many of our export sectors like petroleum, coal, gems and jewellery, electronics and plastic products largely depend on imported raw materials, and as a result, whatever advantages of the weaker rupee we take now will soon be mitigated. Also, I don't think there is any historical relationship between currency depreciation and export growth. We can draw many examples of this from the past years when the country's exports fell despite sharp rupee depreciation. Only a competitive advantage based on innovation and productivity can ensure sustainable development of the sector in the long-term.
So, I don't cheer the fall of the rupee, but at the same time I find nothing wrong in taking the advantage of it by an exporter. In contrast, I believe more dollar earnings at this moment by means of higher exports will turn out to be helpful to the economy to some extent, and this is the reason behind RBI's recent decision to increase the limit of per export transaction through online payment gateways to $3000 to $10,000. This move will help increase the supply of dollars in the market. In addition a number of sectors, including gems and jewellery, healthcare, handicrafts, carpets and furniture, collectibles and toys, etc. will benefit from the measure.
The RBI yesterday kept its key policy rates unchanged. This has come as no surprise. Although May inflation fell to a three-year low of 4.7 percent and April IIP grew at a slower-than-expected 2.2 percent, CAD and the rupee are bigger concerns at this moment. Meanwhile, the Centre yesterday released foreign trade figures which show 1.1 percent y-o-y fall in exports and increase of trade deficit to $20.1 billion due to high gold imports. This development is also concerning.
I invite readers' feedback on the current economic, fiscal, and monetary conditions.
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I: Fall of the rupee
Dr. Haresh M. JOSHI. | Thu Jul 4 08:49:55 2013
We keep on discussing this as a pure economic exercise. To have the Rupee increase in value, we must design and build and maintain world class products that firstly the Indians will purchase and the world will buy. To do this on a reasonable scale we need a credible R&D at all levels. I am told that we as a nation churn out just a few thousand technical Ph.D.'s per year - small compared to the much smaller European countries. We import our energy; we import all kinds of technology at the high end and even handkerchiefs at the low end! Just using systems such a reservations is not the answer to a crisis of talent.
Growing population is a paradise for the people selling to them and a nightmare if we cannot educate them and make them productive by building products that people will buy.
Note that the RBI does not have enough foreign currency to meaningfully halt the fall of the Rupee. It is much easier to intervene to weaken a currency than to strengthen it.
I bet if we exported more than we imported the Rupee will not fall. For THIS WE NEED TO HAVE AN ENVIRONMENT OF INNOVATION AND HONESTY. There are many things the private sector can do, but there are a few (such as creating an homogeneous environment of educated and ethical people that will build and sell quality products at competitive prices) that needs the help of an honest, able and a WILLING Government.
EEFE Account. & rupee fall.
Ranjit Singh Rawat | Wed Jul 3 05:20:16 2013
The above mentioned information on rupee fall is true & correct in my opinion. My suggestion is: Exporters may encash their money at this point of time, use that money in less imported goods & concentrate on their export orders. This will enable them to get re-oders from foreign buyers.
Fall of rupee!
Kamal.M.Nazar. | Tue Jun 25 23:59:05 2013
Said message is not new for us! our government tends to increase the foriegners buying capasity! That means, our traders, exporters, manufacturers sacrificing their revenue! due to our useless our financial system! i have doubt something beyond this rupee fall!
Rupee Fall
Blu-Igle Ltd. co. | Wed Jun 19 13:27:50 2013
I suggest Indian mfrs need to focus on their export markets and minimize to import their raw materials instead used local materials if available in their area unless it is not really available no choice but to import their raw materials.
Fall of Indian Rupee
N.K.Tawakley | Wed Jun 19 06:52:21 2013
The fall of INR is not an over night phenomenon. If you look at the history of Indian exports/imports it is intriguing to note the yoy the exports have always been less than imports. The government over sixty years has never made any effort what so ever to boost exports. Second, it must be noted that the strongest economies of the world are those which are strong on exports. Indian government has never made any effort to make the economy strong.
Third it is childish to say that exporters are benefiting from fall of INR. The importers in US and Europe are smart enough to get their purchase price adjusted according to the raw material prices in India. So don't be fooled.
Fourth while there are plethora of impediments to exports, imports has been made very easy by the government.
Fifth India can never become an exporting nation now because the basic raw material prices in India are higher by 30 to 50% than the world market. Thus leaving out the high value addition items, India has become incompetent in the world market as cost of Indian made products has become very high. This in turn is due to consistent inflation, which in turn is due to extremely high taxation.
The Indian Government still prefers to sleep over the matter. It takes all those steps which make India weaker. It ignores all those steps which will make India strong.
Is Indian Government working at the behest of western powers? which want that India should remain a weak economy?
This is a question to be pondered.
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Re: Fall of Indian Rupee
Dr. H. M. JOSHI | Fri Jul 5 08:18:58 2013
Talking to the government is like talking to a Television set. But we have to keep on trying if we care for our nation. Most of our elected and are extremely good at getting votes but unfortunately have lost the skills on how to improve the nation from ground up. Every problem is blamed on caste system and other primitive mindsets. However there are many problems which can be fixed with ingenuity and honesty and simply a bit of hard work. Until about 1500 years ago, India proved that we can do anything once we set our mind to it. We need good, strong, competent and caring leadership at all levels. But things are so bad that we especially now need to work together, else we are ready for another invasion: Economical is usually the forerunner to a painful military one. Remember the east India Company?
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Rupee fall
Subodh Jain | Wed Jun 19 06:39:01 2013
We will never be benefitted by re. fall as our exports are much less than imports. No concrete steps are taken to increase exports. All gain in exports is nullified due to ever increasing input costs the ever increasing documentation for exports.
We shall bring the enormous wealth with our temples and religious places in the development of the country.
Fall of Rupee
subhash malhotra | Wed Jun 19 06:24:28 2013
Very well said dear.Cograts.
Rupee fall - a different view
Ratan Poddar | Wed Jun 19 05:35:44 2013
This was overdue. We have been hit by inflation for about 2 years. There is no restraint. In the market place the price of all have gone up or going up. Concurrently the Rupee has to fall to adjust to the inflation to an extent. Basically our paise coin have vanished and slowly Rupee 1, Rupees 2 coins are so small that you can miss it. In practice the Rupee has fallen long back ( as prices have risen by by 15-20% over 2 years). So the rupee would fall up to 20% to 63-65.
rupee fall
Bippon Gupta | Wed Jun 19 03:07:04 2013
I ve been into import of medical machinery for past twenty years . I do feel that the depreciation of rupee is alarming for importers, as rightly pointed by Mr Khosla, leaving aside the short term gains, the cost of import of capital goods would increase, thus increasing production and establishment costs for key industries and enterprises, including sensitive sectors like processing/ healthcare/ and manufacturing , eventually hitting back on the paying populace , and providing impetus for inflation , and further downgrade of currency . its a viscous circle, which has to be broken by intelligent and timely intervention, and there should be more public debates and programmes to formulate ways of containing this menace .
Fall of Ruppee
Chandrakanth Agarwal | Wed Jun 19 02:42:21 2013
India is a pathetic country without any light seen at the end of the tunnel. The social issues always affect the economic issues. The cowardly mentality of majority of Indians doesn not allow the growth of exports even though the infrastructure is developed. Innovations and productivity does not improve as one might think due to slavery mentality. The caste problem is the number one issue in the Indian society. Until we get out of this there is no furture for this country. The fact that 500 million people still under the poverty line is clear eveidence to this while our leaders try to send rockets to moon. What a bunch of morons?
To increase exports.
Firdos Mubaraki | Wed Jun 19 00:42:53 2013
All money received from exports should be tax free. This will reduce our price of goods and services in the foreign market, and encourage more manufacturers to export. Better yet the whole country should be made into SEZ why let just a few benefit by bribing politicians and bureaucrats. Let every Indian benefit from the SEZ.
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Re: To increase exports.
Dr. H. M. JOSHI | Fri Jul 5 08:07:12 2013
Dear Firdos Mubaraki: This is one simple solution that even the politicians and bureaucrats would understand. It would definitely help and give us time to fix systemic & structural problems.
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Fall of the rupee
Kashyap Bhatt | Tue Jun 18 18:18:13 2013
Fall of the rupee is a political propaganda. 2014 Central government election is due. Currant government has fallen the rupee at the level of Rs. 59 that can bring lots of extra cash by bringing their black money in India that they can use for election. After election price of dollar will be readjusted to real price of may be Rs. 50 per US$ and get maximum dollars our of India so their original BLACK money will remain unused but difference in exchange will pay for election by screwing Indian economy and Indians. As usual RBI is a puppet of ruling political party.
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Re: Fall of the rupee
M. Uttam | Wed Jun 19 10:48:01 2013
Yes, I do agree with Kashyap that RBI is not truely Independent Country Central
Bank. It is influenced by ruling party
which creates doubt on true monetary policy of our vast country.
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You sum it up by concluding...
Raj | Tue Jun 18 14:56:44 2013
Although the weak rupee may bring some short-term gain to the export sector, currency depreciation can't do any real good to an economy, and definitely not when current account deficit (CAD) is so bad.
Is rupee will go into a comfort position ??
Lokesh Agrawal | Tue Jun 18 14:47:42 2013
Really this is a worry for Importers. Is any expectation when will rupee will go into a confomr position.
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