Exports have increased by 24% in rupee terms

[ajpirzada]

I keep listening to TV Analysts saying that exchange rate devaluation has not increased exports.... This is TOTALLY wrong!

The quantity of exports has increased significantly during the first six months of fiscal year 2019 compared to similar period last year. This is true especially for value-added textile exports (see table 5.5 on page 68 here: http://www.sbp.org.pk/repo…/quarterly/fy19/Second/Chap-5.pdf)

In rupee terms, exports have increased by 24% over similar period (see here: http://www.sbp.org.pk/publications/export/2019/Jan/1.pdf).

How big is this number? This is Rs355bn extra in revenue for the export industry.

Yes, the dollar revenue from exports has not increased as much. But it is wrong to say that exports have not increased. The effect of exchange rate devaluation on quantity of exports is quite obvious.

 

[Proudpakistaniguy]

 

[God Parshuram]

Has trade deficit reduced?

 

[ajpirzada]

Has trade deficit reduced?

The dollar value of exports has increased by a small amount. So the contribution of exports towards decreasing trade deficit has been marginal. Most of adjustment in trade deficit has come from imports due to various factors.

But this is answering a different question which is: has exchange rate devaluation helped with decreasing trade deficit? And the answer: a little.

Whereas exports are desirable on their own due to their contribution towards industrialisation. So it is not advisable to think about exports as simply a matter of trade deficit.

 

[Death Professor]

Has trade deficit reduced?

yes but only around 1 billion $.

I keep listening to TV Analysts saying that exchange rate devaluation has not increased exports.... This is TOTALLY wrong!

The issue is that the gain is pretty much negligible compared to inflation ingested because of it.

 

[xyxmt]

I keep listening to TV Analysts saying that exchange rate devaluation has not increased exports.... This is TOTALLY wrong!

The quantity of exports has increased significantly during the first six months of fiscal year 2019 compared to similar period last year. This is true especially for value-added textile exports (see table 5.5 on page 68 here: http://www.sbp.org.pk/repo…/quarterly/fy19/Second/Chap-5.pdf)

In rupee terms, exports have increased by 24% over similar period (see here: http://www.sbp.org.pk/publications/export/2019/Jan/1.pdf).

How big is this number? This is Rs355bn extra in revenue for the export industry.

Yes, the dollar revenue from exports has not increased as much. But it is wrong to say that exports have not increased. The effect of exchange rate devaluation on quantity of exports is quite obvious.

If I am not wrong rupee is devalued 24% and exports in Rupee value jumped 24%, simple math

 

[ajpirzada]

yes but only around 1 billion $.



The issue is that the gain is pretty much negligible compared to inflation ingested because of it.

I doubt that. Export industry's revenue has increased by 24%. Even if we adjust this for inflation (8%?), this increase will still be around 16% in real terms.

But if you are concerned about non-export sectors then yes I agree. Those sectors are worse off.

However, exchange rate devaluation is normally undertaken when you want to change the direction of your economy towards exports.

If I am not wrong rupee is devalued 24% and exports in Rupee value jumped 24%, simple math

Yes and no.

Yes, rupee has devalued by around 24%. But this does not guarantee that export revenue will also increase by the same amount.

Export Revenue (in Rs.) = Price (in Rs.) * Quantity

Devaluation does not change the rupee price of your goods. Export revenue will only increase if quantity of exports increase. Most commentators give an impression (unknowingly) as if devaluation did not have any effect on the quantity of exports. This is wrong. Data clearly shows that quantity of exports have increased by significant amount.

 

[SecularNationalist]

I keep listening to TV Analysts saying that exchange rate devaluation has not increased exports.... This is TOTALLY wrong!

The quantity of exports has increased significantly during the first six months of fiscal year 2019 compared to similar period last year. This is true especially for value-added textile exports (see table 5.5 on page 68 here: http://www.sbp.org.pk/repo…/quarterly/fy19/Second/Chap-5.pdf)

In rupee terms, exports have increased by 24% over similar period (see here: http://www.sbp.org.pk/publications/export/2019/Jan/1.pdf).

How big is this number? This is Rs355bn extra in revenue for the export industry.

Yes, the dollar revenue from exports has not increased as much. But it is wrong to say that exports have not increased. The effect of exchange rate devaluation on quantity of exports is quite obvious.

But rupee is falling like a rock against other currencies.
The incumbent governments have never been honest with public in such matters.

 

[xyxmt]

Yes and no.

Yes, rupee has devalued by around 24%. But this does not guarantee that export revenue will also increase by the same amount.

Export Revenue (in Rs.) = Price (in Rs.) * Quantity

Devaluation does not change the rupee price of your goods. Export revenue will only increase if quantity of exports increase. Most commentators give an impression (unknowingly) as if devaluation did not have any effect on the quantity of exports. This is wrong. Data clearly shows that quantity of exports have increased by significant amount.

Rs 110 exported = $1 exported (before devaluation)
Rs 140 exported = $1 exported (after devaluation), in rupee terms 24% gain in exports, in $ terms zilch.

Added: in the end you exported more rice for same $, win win for importers, your farmers get less money for their produce, poverty just increased 24%....economic hit man 101

 

[ajpirzada]

But rupee is falling like a rock against other currencies.
The incumbent governments have never been honest with public in such matters.

that is a different point.

the point I am highlighting here is that devaluation has helped exports as intended.

Rs 110 exported = $1 exported (before devaluation)
Rs 140 exported = $1 exported (after devaluation), in rupee terms 24% gain in exports, in $ terms zilch

no my friend...

Lets say I am selling a good for Rs100. When $1=Rs100, I can offer a price of $1 to my international buyer.

Now exchange rate devalues to $1=Rs140. I can now sell the same good for $0.71 (=Rs100).

Because I can now offer a lower price (in $s), I can sell more of my goods to international buyers. When more people buy from me, my revenue goes up.

Note that my revenue has not increased because I started charging a higher price in rupees. I am still charging Rs100 for each good I am selling. But my revenue increased because more international buyers started buying from me.

 

[Death Professor]

Most commentators give an impression (unknowingly) as if devaluation did not have any effect on the quantity of exports.

The issue is the value of exports is almost same as before. It doesn't matter if we sold stuff cheap but increased the quantity of them. In the end we are getting same value out of them in terms of $. Since you highlighted that value added textiles have increased quantity in exports. I don't think we were selling expensive as compared to our competition. e.g Indian Rupee, bangladeshi takka etc..

Overall, I don't see a reason of devaluation other than to satisfy IMF demands, they are hell bent on devaluation and increasing interest rates.

 

[ajpirzada]

The issue is the value of exports is almost same as before. It doesn't matter if we sold stuff cheap but increased the quantity of them. In the end we are getting same value out of them in terms of $. Since you highlighted that value added textiles have increased quantity in exports. I don't think we were selling expensive as compared to our competition. e.g Indian Rupee, bangladeshi takka etc..

Overall, I don't see a reason of devaluation other than to satisfy IMF demands, they are hell bent on devaluation and increasing interest rates.

If you only care about earning dollars then you are right. Dollar value of exports has not changed much.

But if you want to change the direction of your economy towards exports then it worth it. There is a lot of economic research which suggests that exports help in industrialisation. As industrial capacity builds over time, one can start exporting more value added goods. East Asian economies have relied heavily on exports to reach where they are today.

 

[xyxmt]

that is a different point.

the point I am highlighting here is that devaluation has helped exports as intended.



no my friend...

Lets say I am selling a good for Rs100. When $1=Rs100, I can offer a price of $1 to my international buyer.

Now exchange rate devalues to $1=Rs140. I can now sell the same good for $0.71 (=Rs100).

Because I can now offer a lower price (in $s), I can sell more of my goods to international buyers. When more people buy from me, my revenue goes up.

Note that my revenue has not increased because I started charging a higher price in rupees. I am still charging Rs100 for each good I am selling. But my revenue increased because more international buyers started buying from me.

you are selling more good for same money in $, what are you gaining?
you assumption is now you can increase quantity enough to get more $$$s, but your number are showing otherwise, you only exported 24% more goods and same $$$. your bottom line is the same, there is no gain for you

 

[ajpirzada]

you are selling more good for same money in $, what are you gaining?
you assumption is now you can increase quantity enough to get more $$$s, but your number are showing otherwise, you only exported 24% more goods and same $$$. your bottom line is the same, there is no gain for you

my numbers are showing what I mentioned in the original post. That quantity of exports have increased. And also that export industry has earned more revenue in rupee terms. And also that dollar revenue has not changed much.

See my post above in response to Death Professor on why it matters.

 

[Skull and Bones]

Rupee valuation is still not free floating wrt other currencies.