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Q.

Assume the situation the Rupee touches 42 a Dollar. No doubt our exporters will earn less. But mind our massive foreign exchange outflow due to oil imports will reduce significantly. Hence what according to you will be the net impact of this on our economy?

Asked by Good Citizen, 09 Apr '10 11:51 am
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Answers (3)

 
1.

I would say that it is not advisable at present for the sake of reducing forex outflow due to oil imports. We have to learn from the Chinese in this regard. China has about two trillion dollars cash pile and huge forex earning every month. Despite U.S. , E.U. and world pressure, it is not ready to revalue its currency for obvious reason that if it does, it would wipe off its export earnings. The same principle applies to India. The stronger rupee would dry up the NRI remittance of about $51 Billion p.a. Additionally, all the IT/ITES & BPO companies would have to shut shops or else shift their companies out of India to more competitive markets like Philippines, Egypt or Latin American countries. They simply cannot afford a strong Indian Rupee. All export business of India would suffer drastically or have to close down export business. In the absence of export earnings, Indias economic position would resemble the situation prevalent of the pre economic liberalization period. Even for se ...more
Answered by Tony Fernandez, 12 Apr '10 04:32 pm

 
  
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2.

Yes you are right in generic terms. Any trend of appreciation or depreciation will have pros and cons for different sections of businesses and people. If rupee touches 40 to a dollar we can save on oil bills, but exporters will suffer, also remember that Indian companeis could be able to consider acquiring companies, assets, projects abroad and make investmnets and expansions abroad where the opportunities lie.
In addition when ruppe is stronger say at 40 per dollar foreing invesotrs who invested would continue with their investments unless there is some macro economic isssue. So investments from FIIS would remain in the country for certain time because withdrawals at this rate are not favorale for foreign investors.
If we reach a situation where dollar equals 30 rupees probably more people can afford education abroad, travel abroad, some well to do families can remit money to their sons/daughters abroad, which currently may not make sense. Also NRIs and people of foreign origin wi ...more
Answered by NASAman, 09 Apr '10 12:09 pm

 
  
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3.

You are right our purchasing capacity will definately increase, the rupee was below 40 per dollar a few years ago but the exporters lobby joining hands with our corrupt politicians who have billions of dollars stuffed in Swiss banks don't allow the appreciation of Indian rupee.
Answered by manoj thakur, 09 Apr '10 12:06 pm

 
  
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