Stronger Rupee decreased NRI's deposits by more than $400 million
during the first quarter of 2007-08

 

Los Angeles, Oct.06, 2007
Sant Singh//Gary Singh

Strong is good. Weak is bad. These generalizations sound simple enough, but they can be confusing when talking about money. Is a "strong" Rupee always good? Is a "weak" Rupee always bad?

The U.S. Dollar to Indian Rupee Exchange Rate over the last 5 years shows that the rupee is getting stronger with improving Indian economy. A few years back, the weak rupee at Rs. 47-48 per dollar closed at Rs.39.49/50 per dollar this Friday

NRI deposits decreased by more than $400 million during the first quarter of 2007-08, as per the Reserve Bank of India (RBI) figures.

Mostly NRIs have invested in fixed income products such as Foreign Currency Non Resident, Non Resident External deposits, and India Millennium deposits. Now they have to start invest at mutual funds, portfolio management services, direct equities, life insurance, art, real estate funds etc.

Hitungshu Debnath, director, wealth management group, Motilal Oswal Securities said, "In India, the investment opportunity has evolved over a period of time, which has given the NRI investor a better and wider choice of investment today."

Rajesh Saluja, CEO, ASK Wealth Advisors said, "Experts believe a sensible approach on the part of NRIs would be to increase its investment in the Indian markets with a long-term view rather than remitting money to relatives.

NRIs can now remit up to a limit of $1 million per financial year with certain conditions for eligible assets under PIS (Portfolio Investment Scheme) scheme.

Indian IT companies, the Indian exporters, including those engaged in services like backroom officesare feeling bad because rupee is becoming stronger against dollar

NOW:

• Indian firms find it harder to compete in foreign markets.
• Indian firms must compete with lower priced foreign goods.
• Foreign tourists find it more expensive to visit India.
• More difficult for foreign investors to provide capital to India. in times of heavy Indian borrowing.

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One expert Gurudev said:

Indian IT companies instead of relying on a weaker rupee for their profit should now look at coming out with innovative products and technical solutions. What have these companies done in the arena of core system products? Why don’t we have any operating systems, compilers, database systems, development platforms etc coming out of India?

A stronger rupee means we can easily afford foreign trips! This is what I wrote in one of my earlier blogs
“A stronger rupee means Indians can buy things anywhere in the world on par with developed economies! We dont have to spend crores of rupees then to buy a Boeing! We don’t have to pay tens of thousands of rupees for international air travels! A stronger rupee means greater international exposure! There wont be a difference between buying a Maruti and buying a Mercedes! One can go on a trip to the Grand Canyon just like the way one goes to Ladakh or Nepal ! How do you think american citizens are able to tour all over the world? Because they earn more? No. But because their currency USD is stronger.. and this is where a strong rupee will lead us to!…“

What actually gets hurt by a stronger rupee is, other cheaper outsourcing countries like malaysia, china etc attract more business than Indian ones… and hence Indian IT companies too are all set to open up their services in the cheaper desitnations, else they fear more losses!!

Kasi Viswanath, another expert Says:
IT has to become innovative atleast now. It’s a pity that they are cribbing on the growth of their country’s economy. It cleary shows how money minded these big bandwagons have become.

Why did these companies trade in dollars for the matter of fact? They should have put their brains together earlier itself and could have traded in INR. They simply traded in dollars because Dollar was growing stronger back then and from that, they milked their profits. When they had no problems gaining enormous profits(almost everytime, they crossed the expectations), can’t they bear this for a while?

If they had done their business in dollars, please let them worry about the dollar only and let them ask the US government to make the dollar stronger versus the rupee.
Only, if they had done their market business in INR, our Government should be worried about them.

How bitter, this may look, this is the ground reality that, our IT heads were till now projecting the cheap labor thing in different packages. Now, the real challenge comes. Let them take this and I wish them All the Very Best. Infact, we are all there to support in all the way they want. Drill our brains. Push our country farther.

The simple reason is that oil cartel members have been shifting their foreign currency reserves to Europe from the US to hedge their bets. They do not wish to keep all their eggs in the dollar basket. Today the Euro accounts for the largest single currency reserve and has unseated the American dollar from its top position.

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China, which has a trillion dollars stacked up in the US, may not yet be shifting its reserves to Europe or elsewhere, but who knows if it will not set the limit at $1 trillion and start piling up new earnings elsewhere. China badly needs the US market, still the largest in the world, and may not wish to weaken it for its own good.

The terms strong and weak, rising and falling, strengthening and weakening are relative terms in the world of foreign exchange (sometimes referred to as "forex"). Rising and falling, strengthening and weakening all indicate a relative change in position from a previous level. When the dollar is "strengthening," its value is rising in relation to one or more other currencies. A strong dollar will buy more units of a foreign currency than previously. One result of a stronger dollar is that the prices of foreign goods and services drop for U.S. consumers. This may allow Americans to take the long-postponed vacation to another country, or buy a foreign car that used to be too expensive.

Now U.S. exporters are benefit but U.S. consumers hurt from a weaker dollar