Indian stock Markets are shooting the stars as the dollar ripples are moving accross the security exchanges regardless of future aftereffects. World’s economic growth is slowing down.Measured in PPP terms world growth was 5.4% in 2006,will diminish to 5.2% and will fall further to 4.8% in 2008. Conditions are weak in rich countries owing to financial turbulence ,rising oil prices and collapsing housing markets . Many financial experts foresee recession in U.S. But the stock markets are behaving like skyrockets .Shanghai index has grown 200% since its inception .The Bombay sensex is 40% up since last year. The Bombay Stock Exchange’s benchmark 30 shares Sensex crossed the 20000-point mark in october.In 2007 so far ,FII fund flow in stock market is $18.80 billion. Another reason for soaring rupee is remittances by NRIs and software exports. All above factors are fueling the rupee surge. When RBI buys dollars, rupee supply goes up in the economy leading to inflationary pressure. With inflation near 6.5 % in March 2007,the central bank decided not to buy dollars. Now only those who need to import buy dollars and RBI intervention is selective. So demand for dollars has dipped while supply has increased. Result :The dollar is cheaper .
Nightmare for Exporters –Exporters are facing the trouble. When the exchange rate was Rs 44 per dollar,they used to sell Rs 440 item for $10 in International Market. Now they have to sell same item for $11.155 (1$= Rs 39.442) to keep profit margin unharmed.As a result,India is losing its competitive edge in Global Market. Global Market is highly competitive, leaving exporters for two choices either reduce the price or loose the export orders .Sectors like Garments and leathers where margins are low are loosing the market share as they cannot afford the price cut. Software sector cut prices to stay in the market and that is why their profitably is eroding. Infosys and Wipro are the examples.
Made in china brand is bulldozing some Indian sectors .Imported Chinese goods like toys, holi pichkaris ,Chinese made Laxmiji and Ganeshji have flooded the Indian Market resulting loss of livelihood of thousands of peasants.
Indian government must intervene
,
Nightmare for Exporters –Exporters are facing the trouble. When the exchange rate was Rs 44 per dollar,they used to sell Rs 440 item for $10 in International Market. Now they have to sell same item for $11.155 (1$= Rs 39.442) to keep profit margin unharmed.As a result,India is losing its competitive edge in Global Market. Global Market is highly competitive, leaving exporters for two choices either reduce the price or loose the export orders .Sectors like Garments and leathers where margins are low are loosing the market share as they cannot afford the price cut. Software sector cut prices to stay in the market and that is why their profitably is eroding. Infosys and Wipro are the examples.
Made in china brand is bulldozing some Indian sectors .Imported Chinese goods like toys, holi pichkaris ,Chinese made Laxmiji and Ganeshji have flooded the Indian Market resulting loss of livelihood of thousands of peasants.
Indian government must intervene
3 comments:
Rightly said! It has hurt a lot.
Yes you are correct, but if $ do not go down further from 39.00 than it is not a big problem as govt. now has increased Drawback rate and now planiing to reduce income tax rates to give exportes some space to play with comptition. But in future US$ may go down to 36.5-37 nad that point is a big-big problem.
I think atleast textile exporters should now look towards domestic market as the big retail chains are knocking the door of India and they all need merchandise to sell.
When India signed up for Globalization in 1991, there should be no surprise with capitalism taking the front seat. Unless it is security related, it is tough to protect certain areas. The arrival of players like Walmart is inevitable in the long run. In a fast expanding economy like India, everyone will have a piece of the pie to enjoy as long as the government guides a smooth transition.
http://vanguardist.blogspot.com/
Post a Comment