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  • Category: Miscellaneous

    What if Rupee equal to Dollar for growing economy like India?

    As a general views on the valuation of Rupee against dollar, all people say that Rupee should be equal to the Dollar. But here let us discuss that should it be? Should the Rupee equal to the Dollar? What if it happens for growing economy like India?
    If we think practically for growing economy like India what are the advantages and what are the problems we have to face for this kind of currency valuation. I have listed some of the points for the same as follow.
    Advantage of Rupee equal to Dollar
    1. Imports of India will be cheaper. That means foreign products that we are using like i phone, luxury cars, defense equipments will be cheaper for us to buy. Like 600 Dollar phone will be available us at only rupee 600.

    Problem of Rupee equal to Dollar
    1. Exports from India will be costly for other countries that mean we will be not able to cover foreign market for our products.
    2. Employment will be costly in India. Foreign companies are coming here because of cheap employment available in India. They will not willing to pay amount equal to 50000 Dollar for any simple management job.

    Above are the just two simple point that first comes in my mind to start the discussion for the topic. Let us discuss other advantages and problems of the same. I advice the member that make your points keeping in mind current scenario of India as developing economy.
  • #578465
    Hmm interesting, but this is impossible in current economic situation. I heard that value of rupee was equal to dollar in 1947. Well we still did'nt improve that time right? I don't think that increase or decrease in dollar can hugely influence Indian economy. Because dollar is just one of those rich bucks in market.

  • #578482
    To be honest, this thread is amusing, to say the least.

    Let us enrich our knowledge about value of India rupees versus US dollar historically -

    1. In the year 1917, much before independence, the value of one Indian rupee was equal to 11.50 USD.
    2. In the year 1947, when India got independence, the value of India rupee and US dollar was equal. The value of India rupee versus US dollar was as follows historically -

    1975 - 10.409
    1980 - 7.887
    1985 - 12.369
    1990 - 17.504
    1995 - 32.427
    2000 - 45.000
    Today (12.09.2016) - 66.91

    After independence, India has two major financial crisis during the years 1966 and 1991. The Indo-Pakistani war of 1965 led the US and other countries friendly towards Pakistan to withdraw foreign aid to India which compelled India to go for more devaluation. India had a balance of payments problems since 1985 and by the end of 1990, it was facing serious economic trouble. During the period 2000–2007, the Indian rupee was somewhat stabilized, had stopped declining and was generally fluctuating between Rs. 44 to 48.

    The specific answer to the query raised by the author is that it is not possible to speculate too much on an improbable hypothetical scenario.

    Let us encourage each other in sharing knowledge.

  • #578494
    @ Aditya Mohan & Kailash Kumar
    I agree that it is impossible in current economic scenario to happen like Rupee equal to Dollar but here I have created this question to discuss hypothetical situation to get more knowledge on currency valuation system.

    One more point I want to consider that we are currently having floating rate system to Rupee valuation which means demand and supply in the market of Rupee decides it's value and because of that there is very much fluctuation in the value of Rupee. Fluctuation in Rupee creates negative impact on economy. Country like China has system of currency valuation where the government decides the value of their currency and they knowingly devalues to get more foreign investments and employment in their country. Should we have fixed rate system to avoid fluctuation in Rupee value?

  • #578522
    We cannot rejoice swelling of any part of our body for growth. Real growth occurs by taking balanced diet and nutrients. Then the growth will happen to all parts. But one gets swelling all over body due to some serious ailment or injury. That is not good. If our ring finger becomes swollen due to an injury or infection, then the ring won't come out and it will create further problem due to circulation block.

    Somewhat similar case will happen when artificially the rupee value is increased so that it becomes equal to one dollar. That will not be a natural growth, but swelling. It will lead to further dangerous situation.

    Now let us start from some basics. What is US dollar for an ordinary Indian? It is just another commodity. As the legal currency in India is Indian Rupee(INR), for buying (or selling) anything we have to have INR only. So even to get some dollars also we need Indian Rupee to pay for it. So when we say One US dollar is say 64 Indian rupees, it simply means that if you need dollar for something and want to buy a dollar the price you have to pay is 64 rupees. Like any other commodity price of US dollar(or any other foreign currency) can change day by day or hour by hour.The price is determined by the demand-supply situation.
    What is the demand-supply situation of India vs US D? India has a very large quantum of imports-mainly oil. When imports are high, we have to pay the price. As international trade is mostly settled with USDollars, India needs a lot of dollar. The more we need, the demand for dollar is more. So the sellers of dollar will hike the prices.

    What has to be done to make Indian rupee reach near or equal dollar(at least theoretically)? We should have more exports than imports. We should get more foreign inward remittances in dollars from Indian nationals working abroad. Domestic inflation should come down to very low levels. Domestic wage and salary hike, bank interests should come down .

    We should be able to command in terms of economical and political power.
    Not impossible. But the people and more, the political leaders should have the conviction, vision and sincerity to work for that.

    Now at least, let us keep that as our vision. Make in India, Study in India, using only products made in India,going on domestic tours instead of foreign tours. etc. can be a starter.

    Let us keep faith on ourselves and work sincerely, not leave everything to fate.

  • #578524
    #578482 Mr. kailash kumar has scores 5 points without replying the question.This is the beauty of ISC gives marks on the length of the response not on the quality.Yes rupee can be equal to dollar, how? It is the question of debate and delibration. As rupee has taken 70 years of journey to decline to present rate, like wise it may go up upto equal even beyond level.For that India has to become exporting country not importing country. We have to attract the foreign currency in India and has to work hard to achieve this target.
    'Education is a lifelong process, keep on learning new things'

  • #578525
    #578524 - The question is well replied as follows on my previous post -

    'The specific answer to the query raised by the author is that it is not possible to speculate too much on an improbable hypothetical scenario.'

    Let us encourage each other in sharing knowledge.

  • #578572
    #578525 - I think purpose of the creating this discussion by the author is to spread knowledge on Currency valuation system and understanding present situation as said in the reply #578494.

    I agree that very much fluctuation in currency value causes problem to the economy. At the same time we also need Rupee value at lower than Dollar value as developing economy so that we can increase our exports and get more foreign investments in India.

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