Rupee March to Drown Dollar

The Indian Rupee is soaring high against US dollar for the past few years. It is a pointer to the fact that the Indian economy is growing stronger and stronger. It appears to be certain that by the year-end the rupee will be two rupees dearer for the dollar. If the trend continues, a dollar will fetch only Rupees 35, if not Rupees 30, by 2010.

The gradual fall of dollar reflects the poor economic condition of the United States. There is no buoyancy in the market because of high rates of interest and high level of inflation. Besides, the Oil countries of the Middle East are shifting their currency reserve to Europe from the United States. Today the Euro accounts for the largest currency reserve in the world. If China decides to move to Europe, the US dollar would come crashing.

The strong Rupee, however, has weakened the export market of India. Since Indian commodities are becoming dearer in the world market, buyers have been avoiding Indian goods. The software companies, BPOs are a worrying lot since their income have gone down by 15 to 18 per cent even if they have been charging five to ten per cent more year after year.

The government has announced sops for the exporters to ease the situation, but has failed to make them happy. They may be compensated in terms of rupee in the form of tax waiver and bank loans with lower interest rates, but the problem would not be settled. If Indian commodities are highly priced in the international market, buyers may go for other countries. The export lobby is crying hoarse over the rupee strength.

The other side of the story is that the Indian Companies have become aggressive in mergers and acquisitions to become multi-nationals. Over the past one-year, several big houses, including Tata, have bought large overseas Corporations. The Companies coming under Indian umbrella were paid less money in the finance deal so far as US firms are concerned.






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