• What Does a Stronger Rupee mean to Indian exporter : India's textile & clothing exporters seriously eroded their competitiveness in international markets
  

What Does a Stronger Rupee/Weaker Dollar Mean to NRIs

California, May 05, 2007
Gary Singh

Most of the NRIs generally don’t like the word $ “weak” attached to anything they do. So how do we to interpret what the stronger rupee may mean for NRI investors?

The dollar’s continued weakness against Rupee and other foreign currencies means their imported goods and services cost more and our exported goods and services go for less.

• In 1999, dollar become stronger against Rupee 43.05
• In 2001, moved up to Rs 44.94
• In 2002, moved up to Rs 48.59
• In 2003, moved down to Rs 46.55
• In 2004, moved down to Rs 45.30
• In 2005, moved down to Rs 44.10
• In 2006, moved down to Rs 43.21

Today, it crossed to Rs. 41.00

Weak Dollar

The U.S. has a huge trade deficit and it means US import much more than it export. It may increase higher Interest Rates. American consumers will see some of their favorite products rise in price as imports reflect the devalued dollar used to buy them. US exports become more competitive and this could spur increased production domestically. The worldwide Foreign governments continue to try to slow the fall of the dollar by investing heavily in U.S. Treasury notes

The worldwide contract settlements for the sale of oil are carried out predominantly in U.S. dollars. At the end, all US residents will start to pay the bills for a weaker dollar when it comes to energy costs.

The US dollar has historically represented a safe, competitively priced, universally exchangeable currency that dollar holders abroad have great faith in because it represents a strong U.S. economy but weaker dollar will increase trade deficit and leads to serious blow to accept dollars with less purchasing power.

• Some experts argue that US Govt. need to save enough to balance what they spend. If US consumers and US governments as their representatives focus on policies that keep debt of all kinds from continuing its present rate of growth, then US might retains its historic strength and attractiveness as the world’s preferred foreign exchange currency.
• One another economic logic is that most of the foreign companies will continue accepting less valuable dollars in payment for the goods they ship us.

Does the weak dollar help NRI small businesses?

It is a good news for some NRI/U.S. manufacturers, especially those threatened by foreign competitors. The answer is, it all depends on NRI is exporting or importing goods.

If you are a NRI selling product to India or any buyers outside the U.S. means export – then it is a good news for you.

NRI visitors to India:

NRI visitors are big looser because they will get less rupees for his dollars in India. For example if you went to India in 2002, for $1000, you received Rs 48000 and today you will get only Rs 41,000. NRIs importing goods and services from India, will pay more.

NRI wants to buy property in India, also have to pay more. It means that prices of condo or flat may be go down in India

INDIA

As the value of dollar goes down importing oil becomes cheaper. India has joined the trillion-dollar club. The Indian economy is a trillion-dollar economy since its GDP is now valued at Rs.41 trillion. India imports 3/4 of its oil.

Indian companies will invest more money in foreign companies and will import capital equipment to expand their operations.
India's stronger economy, will attract more foreign or big NRI investors. It means they are buying rupees, increase the demand of rupees and the rupee will rise in value. Indian citizen will be able to buy imported items cheaper.
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No one knows how long, how far, or how fast the dollar will fall, so preparing an exact investment strategy is difficult.