Rates of Exchange and Exports

20/10/2013

It is generally believed that when a currency is upvalued(revalued) it would affect exports as the export items would become costlier. This is not really true. When the currency is revalued, imports become cheaper and cost of living comes down. The local currency gets strengthened. In 2005, Chinese Yuan RENMINBI(CNY) was USD 1 = CNY 8.09. Since then the CNY has appreciated and now USD 1 = CNY 6.09. With the appreciation of CNY exports did not decrease. On the contrary, exports from China when up from USD 939 billion in 2006 to USD 2,057 billion in 2012. Indian exports also went up from USD 122 billion in 2006 to USD 298 billion in 2012. The Indian Rupee also depreciated from USD 1 = Rs. 45 to USD 1 = Rs. 60. Here the depreciation is not the main reason for the increase in exports. Even without the deprecation the exports went up to USD 198 billion in 2008. So while fixing the rate of exchange the purchasing power of the respective currencies should be taken into account. The main contributing factor for increase in exports is surplus production, lower cost of production and the quality of products. A currency should not be allowed to depreciate thinking that this would contribute to increase in exports. The rate of exchange between Indian Rupee and US Dollar should be USD 1 = Rs. 20 or Rs. 25.  

 

Author: Singharan Govindan

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Agriculture- Bangladesh performs better than India

12/10/2013

According to FAO, India has arable land of 157 million hectares(ha). It has a population of about 1250 million people. The density of population per ha of arable land is about 8 persons.

Bangladesh has arable land of 7.7.million ha and a population of about 155 million. The density of population per ha of arable land is about 20 persons i.e. about 2.5times that of India.

Bangladesh annually produces about 51 million MT of food grains, mostly paddy(not rice).i.e. about 330kg per head per year while India annually produces about 280 million MT(paddy taken into account- not rice)i.e. only about 225kg per head per year. It is strange that even with low per capita production India occasionally exports food grains while Bangladesh imports food grains.

Bangladesh receives rainfall of about 265 cm annually while India receives only about 110 cm of rainfall. But low production of grains in India is not due to shortage of water,It is due to under utilization of water as can be seen from the very large quantity of river water joining the sea in various parts of India.There shold be more lakes and dams in India and river and rain water should be drained in these lakes and dams .

Bangladesh takes two/three crops in a years on larger proportion of land than India. Average paddy yield in Bangladesh is also high at around 4.3 MT/ha while in India it is about 3.5 MT/ha. Thus while on an ha of arable land Bangladesh produces about 6.5 MT of food grains, India produces only about 1.8 MT(India produces coarse grains on rain fed areas where the yield is very low and this brings down annual production on an ha of land.

India needs to spend more time and energy on finding ways for better utilization of rain/river water -by linking rivers with rivers, rivers with lakes, recharging ground water etc.


Telangana and Seemandhra formation good for both

08/10/2013

The people of Coastal Andhra and Rayalaseema are agitated over the decision of the Central government to form Telangana. The main reason is the fear that their development will be hampered as they may no longer be able to benefit from the economic development of and infrastructure in and around Hyderabad. This fear is unwarranted as the people of Seemandhara living in Hyderabad can and probably will continue to live in Hyderabad area. The industrialists of Seemandhra can continue to invest in Hyderabad area and get the benefits.
The Seemandhra people may also fear that Telangana state my reduce the river waters flowing from Telangana to Seemandhra. To ensure that this will not happen, Telengana state should be made to sign a long term contract about flow of water from Telangana to Seemandhra.
In addition, central government should among others:
i. give liberal special grant to Seemandhra for development of a capital city at a central place.
ii. A separate Railway zone should be created with headquarters in the capital city.
iii. A rail coach factory should be set up in Seemandhra
iv. Part of state highways should be treated as National Highway
v. An international airport should be established in the new capital city
vi. An ordinance factory should be set up.
vii. Separate High Court should be set up
viii. A Central University, an IIT,an IIM, hospital like All India Institute of Medical Sciences(AIIMS) ssould be established
ix. Apparel Park, Leather Products Park should be established
These things will remove whatever fear the people of Seemandhra may have. The two states will develop independently much faster than as a combined state.


Bihar,least developed major state

05/10/2013

Among the major states, Bihar is the least developed state. The main problem is the excess population and high population growth rate. While population in the 0-14 years age group, developed states have only about 25% of the total population, in Bihar it is 35%. The active working age people are in the age group 15 to 59. In this age group, developed states have over 65% of the total population, while in Bihar it is only about 55%. Bihar should give high priority to population control. Otherwise it will be impossible for any administration to develop the economy.

If Bihar is to catch up with the rest of the states, it should make people work as much as possible. Since the number of workers is proportionately less in Bihar, as a short term measure, the employees should be asked to put in an extra hour work i.e. 9 hours a day against 8 hours in other states.

Work should be provided to all able bodied persons. Till adequate number of factories are established, the existing factories should be asked to work 3 shifts a day. Government should establish factories and transfer ownership to the industrialists later.