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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Indian Rupee is not the most value lost currency

15/09/2013

There seems to be a widespread impression that Indian Rupee is the one currency that lost its value. Many other currencies have depreciated more steeply than Indian Rupee between September 1995 and September 2013.

The following are the currencies which depreciated more than Indian Rupee against US Dollar:

Brazilian Real 151%
Columbian Peso 103%
Indian Rupee 100%
Indonesian Rupiah 384%
Nepalese Rupee 105%
Pakistani Rupee 238%
South African Rand 181%
Sri Lankan Rupee 160%

Author: Singharan Govindan