Sunday, June 24, 2007

Why keep the Rupee down?

Thanks to huge inward remittances of dollars, there is pressure on Rupee to appreciate. RBI has been trying to control this appreciation by buying dollars from the market. This in turn is creating inflationary pressure. The reason RBI doesn't want a stronger rupee is that it is bad for exporters. Everyone seems to take it for granted that a stronger rupee is bad for exporters. But, does it have to be so?

Let's take the IT industry. Let's say rupee goes from 40 a dollar to 30 a dollar. It doesn't mean the IT services companies have "lose their competitiveness". They can keep the billing rate at the current levels and still make profit - by cutting costs. Reduce salaries to account for the rising Rupee - other costs like travel etc will go down anyway as they are linked to dollar rate. A 20-30% reduction in salary for IT folks only means they are back to last year's salary levels in rupee terms - hardly makes a dent. Especially, if rupee is at 30 a dollar, petrol and all other imports will be much cheaper bringing down inflation - so your salary may be lower numerically, but in terms of purchasing power you are no worse off.

So, why not let the rupee appreciate to its true value? Why keep it artificially down in the process taxing all the citizens in the form of higher inflation?

Update: A ToI article supports the view with this sentence: "But many feel the focus has to be on cost control, and especially salary cost, which is by far the biggest component — about 40 per cent of total cost."

Thursday, June 21, 2007

Destiny's Child

Rags-to-riches stories are plenty. But I find Rajanikanth's one of the more remarkable ones. A maharashtrian of humble background from Bangalore, no great looks, through sheer grit and determination becomes a super star in Tamil film industry. And then his popularity spreads all the way to Japan! A true Destiny's Child!

I have not seen any of his movies till date and I hope to correct the situation with Sivaji. Here is wishing him all the success.

"India Unbound"

Read this book on a recent long-haul flight. It is written by Gurcharan Das, former head of Procter & Gamble, India. It is partly biographical, but mostly an account of post-independent India's economic policies. Written in an engaging, informal style, peppered with anecdotes, it is a very easy read. Author is clearly a believer in free markets and recounts with frustration the socialist policies India adopted and the kind of impact they had on the economy.

Even though most people blame Nehru for taking us down the road of Fabian socialism, Gurcharan seems to think that larger share of the blame has to go to Indira Gandhi. Nehru at least had the excuse that at that time ('40s and '50s) central planning was considered the way to go by a number of leading economists world wide. When P.C. Mahalanobis came out with his Second Five Year Plan document in 1956, it was hailed as a master piece in economic planning. But by the '70s it had become apparent that central planning was not all that it had been cracked up to be and the author blames Indira Gandhi for not only refusing to change the course but actually taking us deeper into socialism.

Overall, a very informative book for anyone interested in history and India.

Sir Osama

In response to Britain knighting Rushdie, a group of Pakistani clerics have decided to bestow a similar honor on Osama Bin Laden. From now on, he is going to be Saifulla (Sword of Allah) Osama. Just goes to show the depths a society plumbs when it takes the path of religious extremism. I mean, Rushdie and Osama - one a man of letters and the other a gun-toting terrorist - and these guys think they are comparable. Scary.

Return of Atlantis

I haven't followed this Atlantis space shuttle story that closely, but till today I had thought that Sunita Williams is the only passenger on that space ship. Imagine my surprise when I learnt this morning that there are six others along with her and she is not even the leader of the team or anything. Then, why does the Indian media focus only on her? Is it just the first name? Idiots.

Actually, I don't even understand why there is so much hype about these astronauts. Given the risks involved in space travel, I am not even sure if we should be sending these highly qualified people and then worry about getting them back safely. Why not pick a few death row prisoners, give them six month training on the kind of experiments they need to do in space and send them off. If they come back safe, fine, they get amnesty, otherwise, well, they were going to die anyway.