The Indian rupee is soaring — up 9% against the dollar in the last 16 months. That has taken a toll on exports like textiles by making them more expensive on the world market. And the strong rupee poses longerterm threats of overheating the economy . But instead of fighting currency appreciation, as Brazil and some other countries have done, India has been willing to let the rupee rise – for now, at least.
India is simply too hungry for the foreign capital that is drawn to the strong rupee and is driving it higher, because that influx of money is helping support this country’s approach to developing a modern consumer economy.
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Appreciating rupee-threat
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Nice post by you sir...
Please let me add to the topic.
India and China are in opposite positions.
India's Dollar Securities = 281 Billion USD
China's Dollar Securities = 2.5 Trillion USD
China has been devaluing its currency artificially for the last many years to boost its exports.
Thus it has built mammoth reserves of US Securities.
The US is now convinced that cheap Yuan is causing problems in its home country, and has imposed 400% import duty on certain steel products like pipes, which are sold at ten times lower price back at China.
The US has ignored its human capital and is convinced that China is the cause of all its problems, that China's advantage is only because of Cheap Yuan.
Hence, the US is taking a negative stance, that if Yuan does not appreciate, US Fed will allow the dollar to Devalue itself. This will make China's USD Securites reserve, less valuable.
FUNNY THINGS:
US firms have no problems pouring money into emerging markets like India and China, as long as our currencies are cheap, and will pull out the moment the currency appreciates.
The Feds have no problem with the Capital flights from their country, they call it "Quantitative Easing"....
Conveniently US is ignoring that the cheap Yuan has allowed them to industrialize and grow at the fastest pace in 1990s and become the most industrially developed country.
But they feel that cheap Yuan has been the cause of unemployment in the US.
(Startling figure for them - 9% unemployment - they have not come to India!)
Even now, the wage in china is only 4% of US industrial wage....
Cheap Yuan has actually benefited even India, by making many imports cheap....
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