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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how to attract foreign investment

30/09/2013

If any country is interested in attracting foreign investment, it should do the following.

1. to clearly identify the areas in which foreign investment is required

2. decide the incentives that will be available for investing in the country

3. indicate the infrastructure available

4. formulate the advantages in investing in the country

5. work out the approximate cost of production of goods and services in the country

6. estimate the size of the market

7. write the success stories of 2-3 foreign investors in the country in the same area or similar areas

Pamphlets should be printed including the above points and sent to the countries’ Embassies/High Commissions abroad. The Embassies/High Commissions should send these pamphlets with a covering letter to the concerned companies. For example if investment is required in telecom sector, pamphlets should be sent to all (big or small) telecom companies in the country of their accreditation.

The pamphlets should also be sent to general investing companies- venture capital companies, institutional investors, fund managers etc.

The responses from them should be complied and sent to concerned department in the home country. Thereafter only the department officers/minister should visit the foreign country to meet the potential investors who should be invited to visit home country for further discussions, to visit to places etc.

This way it will be easy to attract foreign investment.