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Why cant rupee be allowed to appreciate?

Created by : Hitesh Moghe, Associate, Barclays  | 09 08 2008 22:35:21 +0000
Industry : BankingFunctional Area : Capital Management(Corporate Finance)
Keywords : Rupee Cant Allowed Appreciate
Activity:  305 views;  last activity : 07 06 2010 20:18:09 +0000
Is the rising rupee good or bad for India? What impact will it have on the global competitiveness of Indian firms? Should the RBI or the Finance ministry intervene?
  
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Hit to exports would most-probably be short-term, if the Govt. does not bungle it. Imports would be eased and as India's manufactured goods are having an increasing import content, in the end exports would be helped too. Oil outflow is an obvious benefit. Main detractors to Rupee Appreciation is Agri & Commodity exports, which would be the sectors hit. What has to be kept in view, is that due to our exploding population & increasing wealth, we are going to be Nett. Agri importer shortly and what is against us today, is going to be in our favour shortly. Reg. Commodity Exports like Iron Ore etc., it would create a domestic lowering of prices which are high due to their exportability to Manufacturing Countries like China and ultimately instead of base commodities, we will see export of processed commodities like steel from Iron-Ore. Its the transition period thats going to be painful and we have to make up our minds and embrace the new paradigm of decline of west & ascendence of east. By juggling between the two, we give out mixed signals, resulting in violent variation in exchange rate. An example would be the Indian Exporters losing when they did not book forward contracts and losing again when they did book forward contracts.
By Sanjay Arora, CEO/MD/Director, Videh International Pvt. Ltd.  05 14 2009 12:00:11 +0000
 
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Its good for economy as you will get more FII money into system to creat good liquidity and same will help in infrastructure growth  resulting into overall economic growth
By Dushyant Hada, Territory Manager  | 05 15 2009 14:34:23 +0000
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yes rising rupee is good for economic point of view.it enhances the value of exporting companies bpo. etc

and the authorities like RBI and finance ministry must have regular watch to  keep us balaned/paced with global  economic scenario.

 
By varsha , Head/VP/GM-Quality, frac  | 10 29 2008 06:12:47 +0000
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Rupee appreciation is good for the country as it reflects the strength of our economy. Rupee appreciation during the last year up to Rs.39 had certainly affected the profitability of exporters. But it was in the extreme. Rupee dollar parity should be such that both importers and exporters should find the level comfortable. At present rupee is at its all time low, i,e at Rs.50 per USD. In Kamalnath 's( Minister Of Commerce) own words, the rupee value at present is an aberration. Exporters need not have a level of Rs.50 to have their businesses flourishing. In the present circumstances, 43 per USD will be an ideal level for both exporters and importers. RBI is at present intervening to prevent volatality but not for rupee to appreciate to higher levels. The rupee depreciated by 21 % up till now this year. For rupee to appreciate what is needed is real bulk supplies of dollars through FDI, FII, ECB  etc. FII inflows are dried up and FDI inflows are meagre. As a columnist suggested  recently RBI should lend dollars to one Govt fund from its reserves and the fund will invest the amount in Indian stock market. This bulk investment will prop up the stock market, prevent FII outflows and the huge supply of dollars into the market will also boost the rupee. The suggestion appears to be appealing.
By veguru vijayakumar babu, Head/VP/GM-Finance/Audit, Sujana Group Of Companies  | 10 25 2008 09:21:11 +0000
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I think rupee should be allowed to appreciate and the goverment should not intervene. Historical studies showed that a lot of the 1997 crisis was because currencies did not appreciate. That was during the era of fixed exchange rates in Thailand, Taiwan, Indonesia and the Philippines. And by not letting them appreciate, they actually attracted more capital. By letting it appreciate, people are a little bit more cautious because it looks a little more expensive now. And all of the capital that came in -- they couldn't deploy it favorably, and the result was over-consumption, deficits and then finally devaluation.
By Hitesh Moghe, Associate, Barclays  | 09 08 2008 22:35:21 +0000
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rupee appriciation is ot good for our country as we look in to the inflow there is an out flow aslo so that need to be balanced so it good if RBI can control
By Vinayarajan KV, Head/VP/GM-Sales, EP Tech  | 10 29 2008 07:12:14 +0000
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I believe the that rising rupee is bad for India...currently with so much FII funds moving out of India, it is good for our economy to hold back rupee value to maintain lowered outflow in real terms. Moreover, it is in the overall well-being of the sovereign as we are holding huge dollar reserves which are more required now.
By Reuben Ray, Cluster Head, Commercial Finance-Tata Capital Ltd  | 10 29 2008 05:53:43 +0000
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It  is a macro-economic issue. A rising rupee can have a large impact on Indian exports and it could erode our competitiveness in the global market. Countries such as China are continuously suppressing the value of their currencies. So they may have an edge over us.... The government should intervene to bail out exporters who have been hit by the strengthening rupee.
By Darwin Singh, Portfolio Manger, Kotak Mahindra  | 09 08 2008 22:36:00 +0000
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