Depreciation of Doller
Post 1 of 38
"Appreciation of the rupee has led to loss of comparative advantage for Indian exporters and also has put pressure on margins through cheaper exports," the Confederation of Indian Industry (CII) said in a statement.
According to the CII, in the past year, the Chinese yuan had gained 3.6 percent and Pakistan rupee rose 0.3 percent, while the Sri Lankan rupee fell 4.6 percent.
Thus the Depreciation of Doller hurts Exports from India and may be other neighboring countries
According to the CII, in the past year, the Chinese yuan had gained 3.6 percent and Pakistan rupee rose 0.3 percent, while the Sri Lankan rupee fell 4.6 percent.
Thus the Depreciation of Doller hurts Exports from India and may be other neighboring countries
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15 Nov 2007 04:09
Post 2 of 38
Replying to [Anshu]:
Welcome to economics 101 Anshu! It happens in cycles my man.
Welcome to economics 101 Anshu! It happens in cycles my man.
21 Nov 2007 12:14
Post 3 of 38
Replying to [Anshu]:
I think there is also a positive side of the rupee appreciation and that is:
(1) India might feel lesser burden on the repayment of International loans from IMF or World Bank;
(2) Lesser financial burden in terms of outflow of Indian rupee on the purchase of petrolium and petrolium products which consitutes a bigger chunk of imports of India.
(3) Cheaper imports: Now its time for Indian consumers to enjoy the benefits of cheaper and good quality imports.
So, in totality, if we see at the macro level, Indian economy will be in a better economic position in the years to come barring a few sectors.
I think there is also a positive side of the rupee appreciation and that is:
(1) India might feel lesser burden on the repayment of International loans from IMF or World Bank;
(2) Lesser financial burden in terms of outflow of Indian rupee on the purchase of petrolium and petrolium products which consitutes a bigger chunk of imports of India.
(3) Cheaper imports: Now its time for Indian consumers to enjoy the benefits of cheaper and good quality imports.
So, in totality, if we see at the macro level, Indian economy will be in a better economic position in the years to come barring a few sectors.
27 Nov 2007 05:09
Post 4 of 38
Replying to [vshanker]:I am sorry Mr. Shankar, I am not convinced with your views, as the prices of oil has been increased upto $100 per barrel. how come import of petroleum will be economical.
All other supplier has increased their prices due to dollar depreciation, how come the import is feasible.
Regarding the debt, I donot feel it will have much impact as we are not repaying right now, the interest we are paying or burden on each Indian is increased.
All other supplier has increased their prices due to dollar depreciation, how come the import is feasible.
Regarding the debt, I donot feel it will have much impact as we are not repaying right now, the interest we are paying or burden on each Indian is increased.
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28 Nov 2007 04:05
Post 5 of 38
Replying to [Anshu]:Shakar is referring to the fact that oil (bought in US$) is comparitively cheaper when the Indian Rupee is worth more than it was.
If you think about it this way. If the US$ and the Rupee is a 1:1 ratio (it isn;t but it is easier to do the math this way) then
$100 = 100 Rupee = 1 oil
if the ruppee appreciates 25% then
$100 = 75 Rupee = 1 oil
oil is paid for in US$, if other currencies appreciate against the dollar then comparatively the actual cost of the product/ commodity becomes less..... That's the "easy" way to look at it.... the actuality is that the movement in commodity prices takes the depreciation of the dollar into account, which is partially why the price of oil has risen the last 6-9 months, but other factors have also been involved.
Shankar,
The rupee making imports cheaper is not always a good thing! It can really mess up the current account deficeit as well remember!
If you think about it this way. If the US$ and the Rupee is a 1:1 ratio (it isn;t but it is easier to do the math this way) then
$100 = 100 Rupee = 1 oil
if the ruppee appreciates 25% then
$100 = 75 Rupee = 1 oil
oil is paid for in US$, if other currencies appreciate against the dollar then comparatively the actual cost of the product/ commodity becomes less..... That's the "easy" way to look at it.... the actuality is that the movement in commodity prices takes the depreciation of the dollar into account, which is partially why the price of oil has risen the last 6-9 months, but other factors have also been involved.
Shankar,
The rupee making imports cheaper is not always a good thing! It can really mess up the current account deficeit as well remember!
28 Nov 2007 14:46
Post 6 of 38
Replying to all
Sir, i think the topic was depreciating of Dollar. The depreciation of dollar has some thing to do witht he American economy. The excess government spending on wars, the americans spending more than what they earn & the dwindiling mortage market. All this has lead to the dollar weakining. So comparitively because of the weak dollar the other currencies seem to be appreicated. At the current position Americans are running a few hundred bullions trade deficit with China, the dollar weakining will help them to stablize and if it continues to fall it will encourage their export activity.
Sir, i think the topic was depreciating of Dollar. The depreciation of dollar has some thing to do witht he American economy. The excess government spending on wars, the americans spending more than what they earn & the dwindiling mortage market. All this has lead to the dollar weakining. So comparitively because of the weak dollar the other currencies seem to be appreicated. At the current position Americans are running a few hundred bullions trade deficit with China, the dollar weakining will help them to stablize and if it continues to fall it will encourage their export activity.
29 Nov 2007 02:07
Post 7 of 38
Replying to [Anshu]:
You raised 3 points.
1.…as the prices of oil has been increased upto $100 per barrel. how come import of petroleum will be economical.
Taking your example of petrol $100 per barrel .
If the Exchange rate between US $ and INR had been $1.00 = INR 46.5 as it was in some previous years, the situation as on date would have been that for $100 per barrel, India would have payed INR 4650 per barrel.
But as on date as per customs exchange rate for Imports, the exchange rate is $ 1.00 = INR 39.85, (approx), for the same $100 per barrel, India would now be paying INR 3985 per barrel.
You can see that India would have been paying less by INR 665 per barrel,(in Indian rupee) i.e. $ 17.00 @39.85 for the same qty of petroleum against the same international prices of $100 per barrel.
Now you yourself can see the saving in terms of parting with Indian rupee after the rupee appreciation of Dollar depreciation.
2. All other supplier has increased their prices due to dollar depreciation, how come the import is feasible.
Increasing or lowering prices is a micro activity. However, If foreign suppliers are increasing the prices of their goods for Indian importers, Indian exporters are also increasing their prices for their exports. If Indian exporters would be finding difficulty in exporting at higher prices, foreign exporters would also have the same problem while exporting to India. They cannot increase their prices exorbitantly due to the tough international competition. In addition to that, a bit expensive imports would restrict blind imports by a handful of people and would save Indian manufacturing industries from closing down where lacs of people are employed.
My observation for this prevailing situation is not based on as being an exporter or an importer but simply as a citizen of India taking into account all the sectors of the country and not alone the plight of exporters only.
3. Regarding the debt, I donot feel it will have much impact as we are not repaying right now.
Who says, India is not availing loans from IMF or world bank. It is continuous process. central govt as well as state govts both keep taking loans from International banking system. Recently World Bank has sanctioned a loan of 944 million dollars to India for strengthening rural finance system, vocational training programmes and community-based water management projects. Report appeared in two leading news papers (i)Financial Express dated Nov 2, 2007 (Link: http://www.financialexpress.com/news/World-Bank-to-give-944-mn-loan-to-India/235213/)
(ii) The Hindu dated Nov 03, 2007 Saturday ( Link: http://www.hindu.com/2007/11/03/stories/2007110355701500.htm
Please note that having loans for any development purposes from either IMF or World Bank at predecided interest rates to be paid in US dollar, is an ongoing process. Having Rupee appreciation or US Dollar depreciation is an advantage for India in her larger interest. Normally, all these loans are for the periods of 5 years to 20years to be repaid in the US dollar currency only. Rupee depreciation or appreciation in the long run affects the country when repayments are to be done. Appreciation of Indian Rupee would lesson the burden of repayment on the country by parting with lesser amount of Indian currency for the same amount of dollar and depreciation of the same would increase the burden on the country as more quantity of Indian Ruppe will go out of the country for the same dollar amount leading to more taxes (both direct and indirect) on the common people to meet budgetary deficits of the country. More taxes means greater degree of inflation in the countrty.
You raised 3 points.
1.…as the prices of oil has been increased upto $100 per barrel. how come import of petroleum will be economical.
Taking your example of petrol $100 per barrel .
If the Exchange rate between US $ and INR had been $1.00 = INR 46.5 as it was in some previous years, the situation as on date would have been that for $100 per barrel, India would have payed INR 4650 per barrel.
But as on date as per customs exchange rate for Imports, the exchange rate is $ 1.00 = INR 39.85, (approx), for the same $100 per barrel, India would now be paying INR 3985 per barrel.
You can see that India would have been paying less by INR 665 per barrel,(in Indian rupee) i.e. $ 17.00 @39.85 for the same qty of petroleum against the same international prices of $100 per barrel.
Now you yourself can see the saving in terms of parting with Indian rupee after the rupee appreciation of Dollar depreciation.
2. All other supplier has increased their prices due to dollar depreciation, how come the import is feasible.
Increasing or lowering prices is a micro activity. However, If foreign suppliers are increasing the prices of their goods for Indian importers, Indian exporters are also increasing their prices for their exports. If Indian exporters would be finding difficulty in exporting at higher prices, foreign exporters would also have the same problem while exporting to India. They cannot increase their prices exorbitantly due to the tough international competition. In addition to that, a bit expensive imports would restrict blind imports by a handful of people and would save Indian manufacturing industries from closing down where lacs of people are employed.
My observation for this prevailing situation is not based on as being an exporter or an importer but simply as a citizen of India taking into account all the sectors of the country and not alone the plight of exporters only.
3. Regarding the debt, I donot feel it will have much impact as we are not repaying right now.
Who says, India is not availing loans from IMF or world bank. It is continuous process. central govt as well as state govts both keep taking loans from International banking system. Recently World Bank has sanctioned a loan of 944 million dollars to India for strengthening rural finance system, vocational training programmes and community-based water management projects. Report appeared in two leading news papers (i)Financial Express dated Nov 2, 2007 (Link: http://www.financialexpress.com/news/World-Bank-to-give-944-mn-loan-to-India/235213/)
(ii) The Hindu dated Nov 03, 2007 Saturday ( Link: http://www.hindu.com/2007/11/03/stories/2007110355701500.htm
Please note that having loans for any development purposes from either IMF or World Bank at predecided interest rates to be paid in US dollar, is an ongoing process. Having Rupee appreciation or US Dollar depreciation is an advantage for India in her larger interest. Normally, all these loans are for the periods of 5 years to 20years to be repaid in the US dollar currency only. Rupee depreciation or appreciation in the long run affects the country when repayments are to be done. Appreciation of Indian Rupee would lesson the burden of repayment on the country by parting with lesser amount of Indian currency for the same amount of dollar and depreciation of the same would increase the burden on the country as more quantity of Indian Ruppe will go out of the country for the same dollar amount leading to more taxes (both direct and indirect) on the common people to meet budgetary deficits of the country. More taxes means greater degree of inflation in the countrty.
29 Nov 2007 11:06
Post 8 of 38
Replying to [Foow]:
I quote," Shankar,
The rupee making imports cheaper is not always a good thing! It can really mess up the current account deficeit as well remember." Unquote.
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You are right but I feel to the extent when you say that rupee appreciation sometimes may not be good for the current trade deficit account as I also opine that too much appreciation of the currency making imports cheaper might deteriorate the balance of trade of a country as it will lead to sharp increase in imports compared to exports. But I feel and hope you will also agree to the point that though the country’s current account trade deficit may increase to some extent but on the other hand Govt’s Budgetary deficit account will come down heavily (in Indian context too) due to the less burden of import bills of petroleum and petroleum products, in repayments of interests and principal amount to IMF and World Banks or on any other external funding through loans, in commodity imports by govt. in time of crises, current revenue generation through larger import duty collections, less payments towards exports incentives and less outflow of money in the form of profits and dividends of MNCs operating in the country.(in Indian context also).
Lowering of the Govt’s budgetary deficit account will help the Govt to have more funds in their hands for making larger investments in the country improving the capital formation situation in the country which is also MUST for any country. So, I feel that at a macro level, currency appreciation would be helpful for the country as a whole for its overall development and growth.
Yes, I agree to the level that too much appreciation or too much depreciation, both may be injurious for the good health of the country a whole. A balance should always be there. I feel that in earlier a few years, India had seen the maximum level of depreciated value of INR which was good for exporters but was not good for the country as a whole. Above all, I am of the opinion that a strong currency is a symbol of a strong economic conditions of any country.
I quote," Shankar,
The rupee making imports cheaper is not always a good thing! It can really mess up the current account deficeit as well remember." Unquote.
---------------------------------------------------------------------------------------------------
You are right but I feel to the extent when you say that rupee appreciation sometimes may not be good for the current trade deficit account as I also opine that too much appreciation of the currency making imports cheaper might deteriorate the balance of trade of a country as it will lead to sharp increase in imports compared to exports. But I feel and hope you will also agree to the point that though the country’s current account trade deficit may increase to some extent but on the other hand Govt’s Budgetary deficit account will come down heavily (in Indian context too) due to the less burden of import bills of petroleum and petroleum products, in repayments of interests and principal amount to IMF and World Banks or on any other external funding through loans, in commodity imports by govt. in time of crises, current revenue generation through larger import duty collections, less payments towards exports incentives and less outflow of money in the form of profits and dividends of MNCs operating in the country.(in Indian context also).
Lowering of the Govt’s budgetary deficit account will help the Govt to have more funds in their hands for making larger investments in the country improving the capital formation situation in the country which is also MUST for any country. So, I feel that at a macro level, currency appreciation would be helpful for the country as a whole for its overall development and growth.
Yes, I agree to the level that too much appreciation or too much depreciation, both may be injurious for the good health of the country a whole. A balance should always be there. I feel that in earlier a few years, India had seen the maximum level of depreciated value of INR which was good for exporters but was not good for the country as a whole. Above all, I am of the opinion that a strong currency is a symbol of a strong economic conditions of any country.
29 Nov 2007 11:14
Post 9 of 38
Replying to [vshanker]:Thanks for the explanation, my point is when 1.00 $ = 46.5 then oil prices were half or lower then that, and now the prices are just double and we are paying more amount for the import.
Same is applicable to other commodity imports. I do agree that pricing strategy is made at micro level but the impact of same is at macro level.
Same is applicable to other commodity imports. I do agree that pricing strategy is made at micro level but the impact of same is at macro level.
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30 Nov 2007 00:29
Post 10 of 38
Replying to [Foow]:Dear Peter, I understood what Mr. Shankar was making a point but I hope my reply to Mr. Shankar has made me clearer to you.
The oil prices trend and Rs vs dollar trend can be seen whatever hike in oil prices, the appreciation is negligible in comparison of same.
Another negative point which comes in my mind as FIIs investing in India which has been increased day by day.
If Mr. Peter wishes to invest in India $ 100,000 @39.5 that means he is investing Rs. 3950000 but If you have invested this amount few time back then the sum invested was Rs. 4650000 that means as an Investor also you are loosing 7 Lacs of Rs.
The oil prices trend and Rs vs dollar trend can be seen whatever hike in oil prices, the appreciation is negligible in comparison of same.
Another negative point which comes in my mind as FIIs investing in India which has been increased day by day.
If Mr. Peter wishes to invest in India $ 100,000 @39.5 that means he is investing Rs. 3950000 but If you have invested this amount few time back then the sum invested was Rs. 4650000 that means as an Investor also you are loosing 7 Lacs of Rs.
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About Our Company
CIL Textiles Pvt. Ltd.
CIL TEXTILES PVT. Ltd. Is committed to the production of high quality technical and performanceFabrics for use in wide range of Industrial Markets including, but not limited, Tent and Awning, Outdoor Furnitur...
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30 Nov 2007 00:44
Post 11 of 38
Replying to [Anshu]:
" ......my point is when 1.00 $ = 46.5 then oil prices were half or lower then that, and now the prices are just double and we are paying more amount for the import."
There is no direct correlation between the oil price hike and the rupee appreciation (or dollar depreciation) in India's context. Reasons of US dollar depreciation (or Indian Rupee appreciation) have different grounds whereas the reasons of oil prices rise internationally have different reasons. Decline in the US dollar value has contributed some on oil price hikes but only indirectly. There are some other important and direct reasons for sudden surge in the oil prices after 1998 or say 2000. We should not link rupee appreciation with the oil price hikes internationally.
" ......my point is when 1.00 $ = 46.5 then oil prices were half or lower then that, and now the prices are just double and we are paying more amount for the import."
There is no direct correlation between the oil price hike and the rupee appreciation (or dollar depreciation) in India's context. Reasons of US dollar depreciation (or Indian Rupee appreciation) have different grounds whereas the reasons of oil prices rise internationally have different reasons. Decline in the US dollar value has contributed some on oil price hikes but only indirectly. There are some other important and direct reasons for sudden surge in the oil prices after 1998 or say 2000. We should not link rupee appreciation with the oil price hikes internationally.
30 Nov 2007 02:14