India silently added 2% to her economy In 2 days and nobody noticed

[liall]

Your economy only grows in local currency... you cannot rely on exchange rate...

For example Pakistan's economy grew by around 2% in rupee terms back in 2008-09 but about 20% in dollar. It is your local currency which really counts and despite the fact it will give boost in USD... it is wrong method to measure your economy in foteign currency as the USD can also appreciate anytime... your local currency will remain stable

Exactly and if Indian Rupee goes down 2% in 2 days then that also does not mean our economy has decreased by 2%. The focus should be on long term and not on transient blips.

 

[Skull and Bones]

By the end of this year, USD to INR will settle at 63-64 level, and in a 10 year outlook, I see it at 50-55.

 

[xyxmt]

just a side note, US dollar was down last few weeks, Canadian currency was up also and I am sure Pakistani rupee must be up too. Its wise to know world affairs outside the country before getting too excited about minute stuff

http://www.cnbc.com/2017/03/19/dollar-on-defensive-for-packed-week-of-fed-speakers.html

 

[salarsikander]

That's good analysis.

good analysis that will hardly have any impact

 

[The BrOkEn HeArT]

good analysis that will hardly have any impact

Ya , but may be in future. But the thing is it is something beneficial positive sign, not a lose.

 

[Surya 1]

just a side note, US dollar was down last few weeks, Canadian currency was up also and I am sure Pakistani rupee must be up too. Its wise to know world affairs outside the country before getting too excited about minute stuff

http://www.cnbc.com/2017/03/19/dollar-on-defensive-for-packed-week-of-fed-speakers.html

INR has appreciated against BBP by 5 rs since Jan 17. INR has improved against AUD also.

 

[salarsikander]

Ya , but may be in future. But the thing is it is something beneficial positive sign, not a lose.

Not unless the rend is translated over a period of time. It is just like how daily stock prices increase and decrease

 

[Tshering22]

When people said that how can India be a 10 TR USD economy? I always said that china grew from 2 bn USD to 10 bn USD in a decade. This will requires a 17.5% rise in economy. They grew between 8 to 10% and rest of amount came from currency appreciation. This seem to have started with India. India's GDP is 9.5 tr USD in PPP and about 2.4 TR USD in nominal term. This mean that currency is undervalued by factor 3.9 compared to PPP. So INR has a great potential of Appreciation. This seem to have started. I want to see Rs ahainst USD at 60 by the 2019 when Modi completes his term. I want to see USD at RS 40 aginst INR by 2022. This will add 1.6 time economy just by appreciation and rest 60% may come appreciation. This will make Indian economy around 6 TR USD by 2022 and that will be ahead of any other economy IN nominal term too after china and US. India is already Third economy in the world in PPP.

Good analysis. But we don't manufacture anything high-end and have little tech innovation which could be sold to the world.

Appreciation on food and mineral exports won't really do any long term benefits. We need to improvise like Israelis do and start and aggressive pour-in of tech based R&D.

 

[Zaahir]

While our idiotic print and electronic media is busy in election discussion how sicularism is in danger in Modi's victory, a highly significant economic event went almost unnoticed. In last couple of days, Rupee has appreciated by 2% against USD. While people are foolishly arguing that India shall become a 5 TR USD economy in coming 10 years, I have always maintained on various forum that you guys are taking into account only Growth rate and Ignore the currency appreciation. India Rupee is valued almost 4 time lower that its purchase power and it offers a great chance of currency appreciation. In last 2 days INR has jumped from RS 66.80 a USD to 65.43 a USD which is a jump of 2% in value against USD. We need to understand what this means for us and its consequences.

Understanding the effect on GDP.

2% appreciation in India Rupee against USD means we have added, 2% in Indian GDP in nominal term in USD. This amounts to 2.5 Tr USDx2% is 50 bn USD which is 20% of Pakistan economy. When we struggle a lot to increase growth rate by 0.5% and people speculates whether growth rate shall be 7.1% or 7.5% so that GDP may increase in volume by same percentage and we may add to GDP in our existing level of about 2.5 TR USD. This is a straight hike of 2% in GDP nominal. 2.4 TR usd economy has just grown to 2.45 TR USD economy adding 50 Bn USD in just 2 days. This means we have further widen the Gap between UK economy and Indian economy by 2% more to whom Indian economy just overtook.

External Debt:

India's external debt is about 485 bn USD in March 2016 as per RBI. This simply mean that we have reduced our Debt by 2% in rupee term. This is saving of 10 bn USD while payment in Rupee which mean that we will have to Pay Ts 65000 crore less while discharging our Debt. Appreciation of 1% in Rupee value against USD saves our Rs 30000 crore which we may use for our development.

Weapon and oil import:

Our Oil import was 64 bn USD in 2015-16. Oil prices are rising so as the consumption. Even if I assume it to be 70 bn USD in coming year, this is a reduction of RS 10000 crore in oil Import bill and we may expect that impact of rise in crude oil price will be absorbed by appreciation in Rupee value and end user will not have to pay a price increase of Rs 1.50 per USD.

For our weapon import, we have a plan to purchase 230 bn USD weapon in coming decade. This 2% appreciation will result in a saving of 4.6 BN USD which is about RS 30000 crore.

Trade deficit:

Our import is higher than the export. So Trade deficit shall narrow. We have monthly average of trade deficit between 7 to 10 BN USD. If I take it as about 100 bn USD it is a decrease in Trade deficit by 2 BN USD which is 13000 crore Rupees.

Impact on Export:

Obviously export has always a negative impact on Appreciation of any currency but India export is largely in IT and engineering sector etc which can easily absorb this rise. Some exports such as petroleum products which are linked with oil import and they can easily afford to ease the price as the input are also getting cheaper because of currency appreciation.

Raising of cost effective fund:

Recently reliance took a loan of around 700 to 800 mn USD from International market at a rate of some 2.5% interest. The greatest risk of raising fund from international market is that you will end up loosing a great amount if your currency falls. We show this happening in the case South Korea and collapsing of their economy. If Rupee starts appreciating, hedging of rupee shall be very cost effective and you can buy fund from International market at a very cheap rate which can be as low as 2% to 4%. Your servicing of debt shall be very very cheap and you can overcome the biggest factor of production which is capital in case of India.

Conclusion:

Appreciation is INR VS USD and other currency is a great development in India economy. After the appreciation of Rupee against USD in Vajpayee era, the economy was completely let down by foolish policies of congress and Chidambaram in particular. As Modi rightly said that it is Harvard VS Hard work. BJP government has set policies right. Rupees is by and large stable in 2 and half year of BJP government. Now Rupee has started appreciating. This will be a great achievement and a great boost to Indian economy and Rupee will head toward its correct value which should be around RS 20 a USD.

Read interest rate parity theory. As long as the interest rate differential remains. Rupee will depreciate in the long term to prevent arbitrage. Besides currency appreciation is bad for exports and bad for a countries competitiveness.

 

[noksss]

After the appreciation of Rupee against USD in Vajpayee era, the economy was completely let down by foolish policies of congress and Chidambaram in particular.

The below article comes to my mind when i was reading the above comment. One more proof of how the great Harvard economist used his economic skills to built his wealth and screwed our economy

http://www.firstpost.com/politics/how-upa-turned-ndas-economic-growth-into-shambles-1457697.html

 

[Zee-shaun]

The dollar is weak hence INR gained against USD pushing the GDP up because India calculates it in INR. Its a paper trick with little added value. It does not change the ratings nor does it improve HDI ranking.

Whereas almost all countries analyze the stats per quarter or year on year basis, some need to brag about a wirtschafts wunder only achieved in two days and glorify the leadership. Well this time we need to thank Trump instead of Modi.

 

[danger007]

While our idiotic print and electronic media is busy in election discussion how sicularism is in danger in Modi's victory, a highly significant economic event went almost unnoticed. In last couple of days, Rupee has appreciated by 2% against USD. While people are foolishly arguing that India shall become a 5 TR USD economy in coming 10 years, I have always maintained on various forum that you guys are taking into account only Growth rate and Ignore the currency appreciation. India Rupee is valued almost 4 time lower that its purchase power and it offers a great chance of currency appreciation. In last 2 days INR has jumped from RS 66.80 a USD to 65.43 a USD which is a jump of 2% in value against USD. We need to understand what this means for us and its consequences.

Understanding the effect on GDP.

2% appreciation in India Rupee against USD means we have added, 2% in Indian GDP in nominal term in USD. This amounts to 2.5 Tr USDx2% is 50 bn USD which is 20% of Pakistan economy. When we struggle a lot to increase growth rate by 0.5% and people speculates whether growth rate shall be 7.1% or 7.5% so that GDP may increase in volume by same percentage and we may add to GDP in our existing level of about 2.5 TR USD. This is a straight hike of 2% in GDP nominal. 2.4 TR usd economy has just grown to 2.45 TR USD economy adding 50 Bn USD in just 2 days. This means we have further widen the Gap between UK economy and Indian economy by 2% more to whom Indian economy just overtook.

External Debt:

India's external debt is about 485 bn USD in March 2016 as per RBI. This simply mean that we have reduced our Debt by 2% in rupee term. This is saving of 10 bn USD while payment in Rupee which mean that we will have to Pay Ts 65000 crore less while discharging our Debt. Appreciation of 1% in Rupee value against USD saves our Rs 30000 crore which we may use for our development.

Weapon and oil import:

Our Oil import was 64 bn USD in 2015-16. Oil prices are rising so as the consumption. Even if I assume it to be 70 bn USD in coming year, this is a reduction of RS 10000 crore in oil Import bill and we may expect that impact of rise in crude oil price will be absorbed by appreciation in Rupee value and end user will not have to pay a price increase of Rs 1.50 per USD.

For our weapon import, we have a plan to purchase 230 bn USD weapon in coming decade. This 2% appreciation will result in a saving of 4.6 BN USD which is about RS 30000 crore.

Trade deficit:

Our import is higher than the export. So Trade deficit shall narrow. We have monthly average of trade deficit between 7 to 10 BN USD. If I take it as about 100 bn USD it is a decrease in Trade deficit by 2 BN USD which is 13000 crore Rupees.

Impact on Export:

Obviously export has always a negative impact on Appreciation of any currency but India export is largely in IT and engineering sector etc which can easily absorb this rise. Some exports such as petroleum products which are linked with oil import and they can easily afford to ease the price as the input are also getting cheaper because of currency appreciation.

Raising of cost effective fund:

Recently reliance took a loan of around 700 to 800 mn USD from International market at a rate of some 2.5% interest. The greatest risk of raising fund from international market is that you will end up loosing a great amount if your currency falls. We show this happening in the case South Korea and collapsing of their economy. If Rupee starts appreciating, hedging of rupee shall be very cost effective and you can buy fund from International market at a very cheap rate which can be as low as 2% to 4%. Your servicing of debt shall be very very cheap and you can overcome the biggest factor of production which is capital in case of India.

Conclusion:

Appreciation is INR VS USD and other currency is a great development in India economy. After the appreciation of Rupee against USD in Vajpayee era, the economy was completely let down by foolish policies of congress and Chidambaram in particular. As Modi rightly said that it is Harvard VS Hard work. BJP government has set policies right. Rupees is by and large stable in 2 and half year of BJP government. Now Rupee has started appreciating. This will be a great achievement and a great boost to Indian economy and Rupee will head toward its correct value which should be around RS 20 a USD.

Rupee gained in short term.. we need long term sustained gain... There are instances petrol and diesel prices hiked though barrel price lowered... and the increse commodity price..

 

[Nilgiri]

good read, thanks for the info..

but isn't the crude prices going down?? but still why we're paying too much for petrol in India????!

Govt is shoring up its finances essentially (using inertia from the previous high prices). Same thing is done in Canada (esp given Canada is a major oil producer and we are robbed at the gas pump compared to US - so I often try fill up there big league when im there).

 

[Surya 1]

Good analysis. But we don't manufacture anything high-end and have little tech innovation which could be sold to the world.

Appreciation on food and mineral exports won't really do any long term benefits. We need to improvise like Israelis do and start and aggressive pour-in of tech based R&D.

India is all set to produce all high end product such as Planes and defense material. India is all set to R &D chips in big way and manufacture the same in India. When this is done, Indian ruppe will literay fly.

Currently India manufactures a lots of engineering goods and we are surging ahead rapidely in car manufacturing.

Today INR is UP 8 Paise against USD.

 

[liall]

By the end of this year, USD to INR will settle at 63-64 level, and in a 10 year outlook, I see it at 50-55.

And what is your argument based on? For the 10 year outlook.