This paper is downloaded from internet. this paper is from Abhishek Arora, IBS Hyderabad.
We had downloaded this from internet for academic purpose.
RUPEE APPRECIATION – BOON OR BANE?
BY: ABHISHEK ARORA
IBS HYDERABAD
Whenever currency of a country moves up, it’s usually implicit that the
economy of country is doing well. The rupee against dollar has appreciated from
Rs 46 in July 06 levels to 40.50 levels in May 07, an increase of more than 10 %
in last year.
.
The huge FII’s inflows in the country because of booming financial market, RBI
allowing ECB borrowings till 2.0 $billion and FDI increase in various sectors led
to over supply in Indian forex market .Also the crisis in US mortgage sector has
raised concern over working of US economy, Mr. Ben Bernanke has raised
concern of a slowdown the US which led to depreciating US dollar.
On the contrary Rupee has depreciated against Euro and GBP, so it won’t be
prudent to say that the rise in rupee is purely based on growth in economy; it is
also because of short term recession in US.
Now we are a “Trillion dollar economy” surpassing Russia; we are world’s 12th
largest economy. The forex reserves of country are around $ 200 billion (as on
March 30th).
Let’s have a closer look on how the importers, exporters and FII’s will get
affected?
IMPORTERS:-A BOON
But all is not gloomy here as the “Rupee at nine year high” is a sigh of relief for
importers in the country.
The oil marketing companies are already facing the volatility in crude prices
resulting in under recoveries and so the appreciating rupee here comes to their
rescue.
According to an IOC official -
“For every 1 Re appreciation the input cost of crude dips by 2%”
The rising ...