BOOSTING INDIA'S ECONOMY

A slowing GDP growth rate, falling rupee, subdued investments and the much-hyped policy paralysis are a few among the hundreds of reasons propelling weak sentiments on the future of the Indian economy. Clearly, there is need for a fresh impetus and bold reforms to revive investor confidence. UPA II may be rattled by the coalition blues, but needs to come out of its comatose state to get the economy back on track.  Dr R Swaminathan  Senior Fellow at the Observer Research Foundation (ORF) who suggests ten quick ways to improve the flailing health of the Indian economy.

1) INVESTMENT IN INFRA: Pump up both foreign and domestic investment -- government and private -- in infrastructure projects Increase the time-to-market cycle for these projects by allowing foreign companies to enter the tendering process. Rationalise the tendering processes in road, rail, cold storage and logistics, aviation, ports and distribution. Increased connectivity within India will promote trade and entrepreneurship

2) HIGH-END MANUFACTURING: Implement the integrated manufacturing policy proposed by the Ministry of Commerce in a mission-mode approach. India needs more factories to generate employment. Revive the concept of SEZs and promote them with incentives. Such a focus will increase employment, while generating consumer demand

3) INDUSTRY STATUS FOR AGRICULTURE: Increase the investment in bio-technology and bring in agricultural land reforms that will help farmers with small holdings get greater access to credit while allowing them to consolidate their holdings through mechanisms like Producer Companies and Self-Help Groups (SHGs). This will push up rural demand and purchasing power.

4) ENTREPRENEURSHIP INCUBATION CELL: Free up the entrepreneurial spirit of Indians by encouraging and incentivising them to start their factories and industries. Give special focus to entrepreneurs who bring in innovative high-end technology and generate Intellectual Property Rights (IPRs). Entrepreneurship will not only generate jobs, but will create drivers of growth.

5) ENERGY REFORMS: The country is energy and electricity deficient. There should a nation-wide policy on achieving energy security. With adequate energy and electricity, factories, industries and services-based economy cannot take off. Access to affordable energy is critical for industries as well as for mechanisation of agriculture

6) INTERLINK MAJOR RIVERS: Large parts of country are either water-deficient or water-surplus. Interlinking major rivers will provision for adequate drinking water as well as for industrial purposes. Such an interlinking will also provide an inland waterway system. Access to adequate water and an inland waterway system are critical to jump-start the economy

7) CREATE A HI-SPEED RAIL NETWORK: For an economy to prosper people need to move quickly from one city to another. A high-speed rail network will not only integrate Indian cities, but will also promote the overall economy. An affordable high speed rail network will pump up the growth in several core sectors like construction, manufacturing and services.

8) SKILL DEVELOPMENT: India requires over 120 million people skilled in automobile engineering, construction technologies, medical services, manufacturing and high-end software programming by 2020. India’s young population needs to be trained adequately if the economy has to grow in a sustainable manner

9) BOOST HIGHER EDUCATION: Focus on higher education is critical if India needs to keep up its supply of good quality graduates, post-graduates and doctorates in order to provide for a rapidly growing economy. Indian youth need to be exposed to global standards and private sector should be allowed to tie-up with established foreign universities to provision high quality education

10) E-COMMERCE AND M-GOVERNANCE: Digitise all government records and drastically reduce all physical contact for government services. This will bring in greater transparency, reduce corruption and will rationalise the size of the bureaucracy. Digital governance will reduce delays and corruption in decision-making

PETROL THE REAL KILLER OF NATION'S ECONOMY

  While the opposition parties may have scored a few brownie points against the ruling Congress party, but the role of the BJP during its reign at the Centre (1998-2004) that saw changes in the way petroleum based products are priced is also a causative factor for the increase in fuel prices today, which cannot be ignored. Nor can one ignore the role of the state governments in not containing the fuel price.
Hoax of Petrol subsidy

Reasons being cited by the government and OMCs (Oil Marketing Companies) for hiking petrol prices are – huge losses incurred by these companies on account of selling petrol, diesel at lower prices, huge stress on import of crude oil following depreciation of rupee and worsening fiscal and current account deficit caused by government heavily subsidising these products. Armed with these arguments the hike in fuel prices is claimed as inevitable and unavoidable. A close scrutiny of these claims however shows a different picture.

First of all very statement of petrol being subsidised in itself is a big lie. Is the cost of production of a litre of petrol really higher than its selling price? Below calculations reveal its production cost is merely Rs. 40.6 (on average). Now when price of crude oil in international market has come down from $107 in March to $90 today, cost of a litre works out to be merely Rs. 38.4, less than half of its selling price.

Processing crude oil-> Crude Oil -> Refining -> Petrol -> Refining margin, Transportation, vendor commission = Production cost of Petrol (1 barrel of crude oil yields 150 litre of petrol) Average value of dollar this year (Jan to May) = Rs. 53.34 Average price of crude oil barrel this year = $101.46 Refining, margin, transportation, commission per barrel = Rs. 672 (approx $12)* 150 litre of petrol = 101.46 × 53.34 + 672 = Rs. 6084 i.e. 1 litre of petrol = 6084 / 150 = Rs. 40.6 The cost depends on factors like quality of crude oil, refinery. However changes in it would not greatly affect product price.

Thus there is absolutely no subsidy on petrol either by government or OMCs. In fact exchequer mops up revenue worth billions from various taxes levied on petroleum products. Last year its contribution to tax revenue was as much as Rs. 1350 billion.

Another reason cited much more often is the heavy losses incurred by OMCs. On 24th May, a day following fuel price hike OMC’s like BPCL declared its annual results soon followed by IOC on 28th May and HPCL just a day after. Forget losses, these companies are among the highest profit making companies in the country. Their FY12 (Jan to March 2012) Q4 profits have in fact tripled or quadrupled from last year.

Company Q4 2011 Q4 2012 Profit growth IOC 3905 12,670 224% BPCL 935 3962 324% HPCL 1123 4630 312%

*Figures in crore rupees

Depreciation of rupee and alleged strain on the cost is another flimsy claim. After reaching its peak at $114 in August 2008, prices of crude oil have been going down. Especially in last one month they have fallen from $104.93 (on 27th April) to $90.86 (on 25th May last week). It has offset any cost impact caused by depreciation of rupee.

How come big figures of losses incurred by OMCs are being touted? That’s the crux of the matter. India import crude oil and not petrol. Latter is fully refined in the country in refineries owned by public sector OMCs while that of private OMCs is exported. However following policy change in 2002 companies baseline their prices not on production cost but on import parity. Fictitiously assuming petrol has been imported (at Singapore market rate MOPS95) and then fictitious duties, insurance and freight is levied on it. The difference between import parity price thus (fictitiously) determined and actual selling cost is termed as under-recovery. For eg., if import parity price is Rs. 90 and a liter is sold at Rs. 80 then Rs. 10 is the under-recovery!

What about Working People’s under-recoveries?

If this is model that is being followed for petroleum based products exclusively, then why not universalise it for all other commodities? For example this year the price of cotton in international market has been around $1 per lb making it Rs. 12,000 per quintal. But the Indian peasants are being paid a miserable Rs. 3000 (that at times doesn’t even cover production cost). Following import parity pricing model here and without even levying fictitious duties, freight, insurance etc., the under-recovery turns out to be Rs. 9000 per quintal. Is government contemplating on compensating the Indian peasants for this? While it’s heart bleeds at under-recoveries of profit making companies, there is not even a drop of tear shed on the deaths of hundreds of thousands of peasants in rural India.

And what about the under recoveries of the Indian workers? If they want to match fuel prices to international level, why not also match their minimum wages to that level? In Britain, for eg., minimum wage per hour is 6.19 GBP, which is low for that country (with petrol at 1.25 GBP per liter, one can buy 5 liter in an hour’s wage). With an 8 hour working day and 22 working days a month, monthly wages turns out to be 1089 GBP translating into Rs. 92,602 (with 1GBP = Rs. 85 ). Even if one assumes minimum wage in India at Rs. 7000 (in reality it’s much lesser), there is an under-recovery of Rs. 85,000 per head!

Real Culprits

Thus in reality, the Indian working people are already being made to pay much higher than the actual cost of petrol. With production cost of Rs. 40, OMCs are making astronomical profits and they are crying hoarse over fictitious notions of under-recovery. It is a daylight robbery on the nation as a whole and all of its working masses (akin to East India Company). Who are the real culprits? Government and OMCs are only part of the answer.

One needs to dive deeper to find out the real culprits behind this crime. First of all what are OMCs? Understanding their nature and changes to their structure in the past 2 decades holds the key to the issue at hand. Though IOC (Indian Oil Corporation), BPCL (Bharat Petroleum Ltd) and HPCL (Hindustan Petroleum Limited) are government enterprises, they are indeed companies listed on stock markets and a cursory glance at its share holding pattern is an eye opener.

Company Govt Private IOC 78.92% 21.08% HPCL 51.11% 48.89% BPCL 54.93% 45.07% ONGC 69.23% 30.77% GAIL 57.34% 42.66% Oil India 78.43% 21.57%

With the advent of capitalist globalisation, meant that Indian economy embraced neo-liberal reforms in 1991 . Under capitalism, the sole objective of any productive process is solely profit. This profit is distributed amongst its shareholders. Higher the profit, higher are the returns in the form of dividend. In accordance with this, the OMC’s were part-privatised through disinvestment. With privatisation, these companies openly embraced the naked principle of profitability. To facilitate this, in 2002, Administrative Price Mechanism was replaced with Import Parity Pricing.

Even though government is still the major stakeholder, private investment mandates its functioning independent of any government control. This is the precondition for the investment of private capital into any enterprise. Keeping this mind, the government only wants to further disinvest its stake. All talk of consultations of company executives with the government before any proposed price hike is just to keep ‘reaction’ in check.

Significant portion of the profits earned by OMCs is distributed to these private investors. It includes mutual funds, insurance companies, domestic and foreign institutional investors and also other government companies that have cross-invested into each other. Last week declaring its annual results BPCL announced 1:1 bonus share to its investors and a dividend of Rs. 11 per share. The company has 12,49,88,043 shares held by private investors implying total dividend paid to them at Rs. 1 billion 38 crore. Below table shows dividend paid by PSU Oil companies in 2009-10 and share of private investors in it.

Company IOC ONGC GAIL Oil India Dividend 31.81 bn 70.58 bn 9.51 bn 8.18 bn Private Investors 6.71 bn 21.72 bn 4.06 bn 1.76 bn

*Figures in billion rupees

Matching fuel prices to global level translates into soaring profits to the private investors. That’s the real game. It must be noted here that ONGC is the highest dividend paying company (higher than Reliance) in the country and 30.77% of it is awarded to private investors.

Now this is just the first part of the story; second part is even more scandalous. One can see monopoly of public sector OMCs (IOC, HPCL, BPCL) in petrol, diesel retail market. Private sector giants like Reliance, Essar (domestic) or BP, Shell (global) have an insignificant presence. Now it is worth pondering upon how come such a profitable sector as oil marketing is not monopolised by private entities while everything from Education to Health service is? As prices of fuel in India are lower than global level, these companies do not venture into the domestic market. However India’s petroleum retail market is obviously too big to ignore. In fact these companies desperately want the market to be opened up and matching of prices to global level is the prerequisite so that they don’t have to compromise on their profits. It provides an investment opportunity worth hundreds of billions and corresponding profits.

As illustrated above, it is vested interests of private investors or private capital that is at the root cause for the hike. It is essentially these interests that unleashed treacherous and the scandalous propaganda calling for complete deregulation of petrol and diesel prices. An army of sundry pundits, economists and journalists on the payrolls of these corporate giants has been deployed both nationally and internationally towards this end. The Economist, Finance Times, Wall Street Journal along with their juniors in Indian media launched venomous attack calling for opening up the Indian market. While we could see higher degree of aggression in global media, domestic ones used different tactics. Consciously concealing the truth, they painted a sorrowful and a miserable picture of ‘government’ companies ‘bleeding with heavy losses’ standing on the verge of doom and thus pleading price hike to keep them afloat. Many of them extended passionate appeals calling upon masses to swallow the ‘bitter pill’ of price hike to salvage the economy or nation as a whole and thus to stand up for the occasion.

A gloomy picture in global economy coupled with acute crisis in Eurozone has led to foreign capital inflows to India drying up. Subsequently the economy, captive of hot speculative capital saw growth rate plummeting from 9% to 6.9%. With India’s quarterly growth rate at just 5.3%, the Indian government is more than ever desperate in seeking foreign investors and latter has been ably arm twisting the former to make terms of investment yet more favourable. Succumbing to this pressure, government has yielded by its discreet nod to fuel price hike.

The Central Role for the Indian Working Class

Under capitalism, private capital is the supreme authority and State is just an instrument to further its interests. In modern democracy, this responsibility is vested upon ruling party. In its rule of over past 8 years, Congress led UPA government has truly lived up to this expectations by honestly serving the interests of private capital. Release of Nira Radia tape saw Mukesh Ambani honestly acknowledging ruling party’s contribution by commenting ‘Congress to apani dukan hai’ (Congress is our shop). However BJP staging fake protests at petrol hike is no different. It was Vajpayee led BJP government that in 2002 dismantled Administrative Pricing Mechanism (APM) only to be replaced with import parity pricing and current fuel hike is merely a logical outcome of this decision.On the other hand, while the CPI-M, CPI rightly attack import parity pricing, but they have lost credibility by its collusion with capitalists; Singur and Nandigram being only its visible manifestations.

The situation is alarming. Petrol prices have been hiked and deregulation of diesel is just round the corner with domestic gas price hike in waiting. All of this is bound to wreck havoc. With persistent calls for further disinvestment of public sector, OMCs are pouncing hard demanding more flesh and blood. And all this so that astronomical amount of capital they have accumulated could be invested and they could reap higher profits from it. That is the real story behind petrol price hike.

OUR DEMAND:

1. Immediate scrapping of import parity pricing to be replaced with production cost based model.
2. Re-nationalisation of public sector OMCs both upstream (ONGC, GAIL, OIL) and downstream (IOC, BPCL, HPCL)with zero percent private investment, under democratic worker’s control and management.
3. Nationalisation of private Oil companies including Reliance, Essar, Cairn Energy without any compensation, under democratic worker’s control and management.
4. Scrapping all tax soaps extended to capitalists that creates a big hole in public revenue (worth Rs. 5.5 lakh crore last year)
5. Building a sustainable public transport system that would considerably cut down usage of petroleum products and related air pollution. Expenses to be funded by levying heavy taxes on cars and other private vehicles
6. Immediate 50% Tax on cash pile and corporate wealth to bring down the prices and to pay for fiscal deficit
7. For full nationalisation of banks and key industries; for a democratic workers control and management of all the resources.
8. For a new mass workers party that would genuinely represent the interest of the working masses

Should Youth Enter Into Politics Or Not ?

Hearing word politics the first thought which comes to our mind is corruption and we conclude by saying that politics is bad or politics is

dirty. But is really politics bad? No, politics is not bad it’s the people who

have made it bad or dirty.

Our country needs educated youth to come up and join politics. The

future of our country is today’s youth and it is our responsibility to work

for our country. It’s a need for our country to elect right government Educated youth are desperately needed in our politics. Youth can work

harder, can be more innovative and can contribute towards the development of our country more effectively.

For example, Rahul Gandhi a youth politician and a role model for

many has really worked harder for the nation. No politician in our

country goes to the rural areas and talks or listens to their grievences .

Another example is of the Chief Minister of Jammu and Kashmir

Mr. Omar Abdullah who is 38 years old and youngest chief minister of

our country. He worked with the firm determination and has brought

changes in the state. For the first time the elections in Jammu and

Kashmir took place peacefully without any violence.

During a speech delivered by Rahul Gandhi in Kochi he said

“The difference between a young person and a old person is that a young

person looks towards the future and an old person looks in the past”

Thus, there is a need for the young generation to enter into politics

and work for the nation. There are many corrupt people in our politics but we all need to change the system instead of criticizing it.

In a nut shell, youth should enter into politics because an educated youth can change the scenario of country in every aspect. He/She has the caliber to make our country develop. In our politics, we need educated youth for development of the nation.

SCIENCE IN SANKSKRIT

          Sanskrit language is an ancient one.  The word itself means “Pure, Perfect and Refined”.  It is also known as “Deva Bhasha” or “the language of God”.  The foundation of Indian culture is based on this language.  Sanskrit is viewed only as a religious language, but to our surprise, its literature rich in Philosophy, Astronomy, Mathematics and Science etc.   Many scientific ideas like Revolving of Earth around the Sun, Newton’s Laws of Gravitation have already been found to be incorporated in Sanskrit literature. 

          In mathematics, Zero forms an integral part of thousands, millions and trillions.  However, this Zero was already invented by Aryabatta.   The Number “One Lakh” is called “Laksha” in Indian Numerical System, “100 Lakhs” is called “One Crore”, 100 Crores is called “One Arab”, 100 Arab is called “One Kharab”.  100 Kharab is called “One Neel”.  100 Neel is called “One Padma” and 100 Padma is called “One Shank” and 100 Shank is called “One Maha Shank”.  One Maha Shank can be described as “1” followed by 19 Zeros.  Aryabhatta had calculated the value of Pi as 3.1416.  Further, the Pythagoras theorem was known to Indians as “BAUDHAYANA SUTRA” thousands of years ago.

          Like Mathematics, in the field of Astronomy, Aryabhatta, in his book “Aryabhattiya” presented a mathematical system that postulated that the earth rotates on its own axis and revolves round the sun.  Varahamihira presented the theory of gravitation.  Even before the invention of modern instruments like Telescopes, the time and date of solar and lunar eclipses are being predicted based on Vedic calculations.  The Speed of Light of 3X10⁸   was already calculated in Rig Vedas as “2202 Yojanas in Half-a-Minute”.  One Yojana means 9 Miles. 

          In the field of Medicine, Sushruta was known as the “Father of Plastic Surgery”.  In his book, “Sushruta Samhita” he had mentioned in detail about the medicines, surgeries and tools used in surgeries.  The book “Charaka Samhita” is the foundation for Ayurvedic medicines.

          In Engineering, immense progress was made, which is evident from the Great Indian Temples like Sun Temple of Konark.  The references to Construction of Ships, Types of Transport, Alloys and Metallurgy of Iron and Copper were already discussed in “Bhrigu Samhita” and “Yantrarnavam” etc.

          A recent study by Dr.Fred Travis, HOD, Department of Neurophysics, Maharishi Univerisity confirmed that reading Sanskrit verses have profound physiological effects on human brain.  This suggests that physiological state reached during practicing medication and active mental process integrated while reading Sanskrit is similar.

          Thus, we can take pride in the fact that modern invention and theoris have already been incorporated in our ancient language and it is our duty to preserve our pristine heritage.

         

BE INDIAN BUY INDIAN

                                   TO IMPROVE OUR ECONOMY

Dear Friends

You can make a huge difference to the Indian economy by following few simple steps.Please spare a couple of minutes here.....

for the sake of India...... our country. 

Simple example:

Before 5 months 1 Canadian $ = Indian Rs. 32

After   5 months 1 Canadian $ = Indian Rs. 37

Do you think Canadian Economy is booming? No, but Indian Economy is going Down! Our Economy is in your hand.

INDIAN economy is in a crises. Our country like many other ASIAN countries is under going a severe economic crunch. 

Many Indian industries are closing down. More than 30,000 crore Rs. of foreign exchange are being siphoned out of our 

country on products such as cosmetics, snacks, tea, beverages.. etc which are grown, produced and consumed here.

A cold drink that costs only 70/80  paisa to prodece is sold for nine rupees, and a major chunk of profits from these 

are sent abroad. This a serious drain on Indian economy.

Coke advertisements says "JO CHAHO HOJAYE, COCACOLA ENJOY" (Wahatever the hell, let it happen, you drink coke) 

What can you do? You can consider some of the better alternatives to aerated drinks. 

You can drink Lemon juice, fresh fruit juices, chilled lassi, Butter milk, coconut water, Milk.....

What you can do about it?

1. Buy only products manufactured by WHOLLY INDIAN COMPANIES.

2. Enroll as many people as possible for this cause.Each Individual should become a leader for this awareness.

This is the only way to save our country from severe economic crisis. You don't need to give-up your lifestyle. 

You just need to choose an alternate product.

BATHING SOAP:

USE – CINTHOL & OTHER GODREJ BRANDS, SANTOOR, WIPRO SHIKAKAI, MYSORE SANDAL, MARGO, NEEM, EVITA, MEDIMIX, GANGA , NIRMA BATH & CHANDRIKA INSTEAD OF – LUX, LIFEBOY, REXONA, LIRIL, DOVE, PEARS, HAMAM, LESANCY, CAMAY, PALMOLIVE

TOOTH PASTE:

USE – NEEM, BABOOL, PROMISE, VICO VAJRADANTI, PRUDENT, DABUR PRODUCTS, MISWAK INSTEAD OF – COLGATE, CLOSE UP, PEPSODENT, CIBACA, FORHANS, MENTADENT .

TOOTH BRUSH:

USE – PRUDENT, AJANTA , PROMISE

INSTEAD OF – COLGATE, CLOSE UP, PEPSODENT, FORHANS, ORAL-B

SHAVING CREAM: USE – GODREJ, EMANI

INSTEAD OF – PALMOLIVE, OLD SPICE, GILLETE

BLADE: USE – SUPERMAX, TOPAZ, LAZER, ASHOKA

INSTEAD OF – SEVEN-O -CLOCK, 365 , GILLETTE

TALCUM POWDER:

USE – SANTOOR, GOKUL, CINTHOL, WIPRO BABY POWDER, BOROPLUS

INSTEAD OF – PONDS, OLD SPICE, JOHNSON BABY POWDER, SHOWER TO SHOWER

MILK POWDER: USE – INDIANA , AMUL, AMULYA

INSTEAD OF – ANIKSPRAY, MILKANA, EVERYDAY MILK, MILKMAID.

SHAMPOO: USE – LAKME, NIRMA, VELVET

INSTEAD OF – HALO, ALL CLEAR, NYLE, SUNSILK, HEAD AND SHOULDERS, PANTENE

MOBILE CONNECTIONS – USE – BSNL, AIRTEL

INSTEAD OF – HUTCH

Every INDIAN product you buy makes a big difference. It saves INDIA . Let us take a firm decision today.

BUY INDIAN TO BE I N D I A N we are not against of foreign products.

WE ARE NOT ANTI-MULTINATIONAL. WE ARE TRYING TO SAVE OUR NATION.

EVERY DAY IS A STRUGGLE FOR A REAL FREEDOM. WE ACHIEVED OUR INDEPENDENCE AFTER LOSING MANY LIVES. THEY DIED PAINFULLY TO ENSURE THAT WE LIVE PEACEFULLY. THE CURRENT TREND IS VERY THREATENING. MULTINATIONALS CALL IT GLOBALIZATION OF INDIAN ECONOMY. FOR INDIANS LIKE YOU AND ME IT IS RECOLONIZATION OF INDIA.

THE COLONIST’S LEFT INDIA THEN. BUT THIS TIME THEY WILL MAKE SURE THEY DON’T MAKE ANY MISTAKES.

WHO WOULD LIKE TO LET A’ GOOSE THAT LAYS GOLDEN EGGS’ SLIP AWAY.

PLEASE REMEMBER: POLITICAL FREEDOM IS USELESS WITHOUT ECONOMIC INDEPENDENCE.

RUSSIA , S.KOREA , MEXICO ……….THE LIST IS VERY LONG!!

LET US LEARN FROM THEIR EXPERIENCE AND FROM OUR HISTORY. LET US DO THE DUTY OF EVERY TRUE INDIAN. FINALLY: IT’S OBVIOUS THAT U CAN’T GIVE UP ALL OF THE ITEMS MENTIONED ABOVE, SO GIVE UP AT LEAST ONE ITEM TO FOR THE SAKE OF OUR COUNTRY.

SEE IF U CHANGE THEN UR FRIEND WILL CHANGE. LIKE THIS EVERYONE WILL KEEP ON CHANGING TO INDIAN PRODUCTS AND IT WILL BOOM OUR COUNTRY'S ECONOMY.

IF U R A TRUE INDIAN THEN U WILL SURELY CHANGE.

Dollar up and rupee down - Why

1 US dollar = 55.0400 Indian rupees.

The oil minister will raise petrol prices by the end of this year as rupee is down again. RBI always tried to protect rupee by selling off dollars but still has been unable to hold rupee from falling at a rapid pace. The last resort of controlling rupee fall is issuing bonds by Reserve Bank of India. To prevent further downfall of Indian rupee, RBI is considering selling dollars directly to oil marketing firms.

Now let's look into why dollar is appreciating heavily against rupee.

Recession is less in India, then why dollar is moving up when rupee must be strong.

We all know about recession and it is worse in US and better in India as compared to US, then how come dollar is appreciating with respect to Indian rupee? Don't you think that Indian rupee should go up and US dollar should move down?

Rupee 50 note INR

Source: soni2006 copyright 2012

Dollar up and rupee down why rupee 100 note - Indian currency

Source: soni2006 copyright 2012

Bloomberg's inverted scale of rise and fall in rupee and dollar.

Source: Bloomberg

Petrol prices will go high - expect 100 rupees per liter in one year - driving will be costlier than ever.

Source: soni2006 copyright 2012

Vehicles moving at a market near Candolim beach in Goa.

Source: soni2006 copyright 2012

There are so many reasons of depreciating rupee, but I would like to explain the first one, which is most important.

Why dollar is moving up and rupee is going down? There has been a recent fall in rupee since some days ago and a dramatic increase in dollar. It was 49.50, then 50.12, 51.10, 52.60, 53.54, 54.40, and yesterday it was 55.18 and today according to google search

1 US dollar = 55.0400 Indian rupees.

Why is this happening?

First Reason - Dollar is in Demand

BRIC countries like India have emerging economy, so a huge percentage of investment in India is from outside the country, especially from US but due to recession in US, big institutions are collapsing and many of them are on the verge of breakdown. They are suffering huge losses in their country. They have to maintain their balance sheets and look strong on all statements, so to recover losses in their country, they are pulling out their investments from India. Due to this pulling out of investment by these big companies from India or in other terms disinvestment, demand of dollar is raising up and rupee is depreciating.

There was a huge interest rate differential between India and US. Now RBI is reducing all kind of rates to increase money supply in market, so deposit rates will also move downwards. It will reduce the rate differential between two countries and affect the fixed investment in India in a negative manner.

Second reason - Collapse of International Trade

If you observe in terms of international trade, commodity prices are crashing at international level.

Importers are trying to accumulate dollars, as they have to pay in terms of dollars and at the end demand is increasing against the rupee. This has not happened yet due to lack of confidence in all kind of markets.

Exporters have a very few orders from outside countries, so there is no matter of converting dollar into rupee thereby decreasing demand for rupee.

Besides the above-mentioned two reasons, there are many other reasons, which I would like share in the comments section below with you and others.

Now 1 USD is at 55.04 INR and rupee is expected to depreciate further due to RBI instructions to exporters and banks. The major gainers due to rupee down were Indian IT companies including BPOs, call center outsourcing, medical transcription outsourcing, and Indian content writers, especially Indian Adsense publishers who also earn in dollars.