Much talk these days about the rising rupee and how it is detrimental to Indian exports and the economy. On the contrary, this policy of letting the rupee rise shows that a smart and intelligent bunch of people are incharge.
The only thing I remember of my economics lectures in B school is that in a global environment its impossible to pursue an independent monetary policy. Well, the politicians incharge have found a way to do just that - let the rupee rise and raise a barrier for hot money flowing into the economy...within these barriers you can now quietly do your own thing and raise interest rates - in other words - pursue an independent monetary policy and curb inflation at your own pace.
Dont get me wrong, I dont like rising interest rates either - I have a huge mortgage to pay off. Besides a rising rupee is bad news for me too since I just relocated to London. I have effectively taken a 10% pay cut since moving here!! And that hurts.
So what about falling exports and their impact on falling employment. A couple of small suggestions to India's small business from a man who will always be scared to setup something on his own - Invest in cheaper capital goods while the going is good and improve quality of products while you can. Another suggestion is to look closely at the rapidly developing domestic market. A billion people should be enough for us. Besides, Europe is raising interest rates too and therefore could be looked at as an alternative to the US.
I have great respect for the small businessman in India - sure everything isnt always above the board but this man did manage to generate profits in an era when interest rates were still high and corruption costs have always been around 5-10% of total business costs. Imagine what he can do when given a free hand...
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