Money Changers

There continues a huge debate about rupee appreciation. The exporters lobby being very powerful ensuring that the rupee continues to get regulated. Also the common perception is that an appreciating rupee does not bode good omen for our economy in the present circumstances with the stock market booming because of the huge cash inflows from exports.

An appreciating rupee will ensure increase in quality of goods and services as India will start losing the cost advantage. We would no longer be able to export products at the lower end of the value chain. It will also ensure more research work in the IT industry than just specialisation in back end jobs. With the present growth rate of economy, the Government is going to be compelled to start more huge infrastructure projects. A lot of hardware will be needed to be imported for the same. A large amount of imported technology is going to be required in Banking infrastructure, Pharma and Medical equipments, Telecom Infrastructure, etc since Indian firms still do not produce high quality equipments required for these sectors. The appreciation in the rupee will promote imports and bring in the best technologies available at a lesser cost to the country.

Also it will encourage Banks to borrow more from abroad and lend it at lesser rates in the country, something that will definitely help for the true financial inclusion of the masses.
There has to be a point where RBI should stop becoming a market player. The weak currency policy has outlived its purpose. The controls over Banks borrowings need to be diluted and the competitive forces alone should decide the valuations over a period of time.

Also the whole SEZ policy might have to be revisited with the rising rupee.May be I do not sound practical at this stage and the brains sitting in Delhi would definitely have some strategies in their minds, but how often have we seen economic imperatives being subjected to political considerations and lobbying by interested groups.

The Bean counters of India should not forget that the whole outsourcing industry was only the means and not the end of what we intend to achieve. Indian Business is again set for a new paradigm.

-Aditya