$ vs INR – debate

We publish here a view on the strength of our economy, USD vs INR exchange rate,  reason for the weakness of INR against USD, and a proposed solution. We have not edited anything in the write-up. 

As suggested by the author, we invite everyone to discuss the accuracy of data and opinions in this article. The aim is to have a healthy discussion about one of the major issues affecting IT employees – salary hike, foreign exchange and savings. Do you agree with the findings? What will be the implications of the proposed solution?

Its known that the strength of a country depends on its economic health, that is its currency strength. Our currency INR was much valuable against the dollar a few decades back. I remember INR quoting around Rs 30 to 35 or even lesser per dollar. When more and more business houses started doing business overseas and its all liberalized, INR has slided down and has not improved as you see INR conversion rate to dollar is around Rs.70.

Think of a situation, where an Indian working for a MNC in year, say 2004. In those times drawing a salary of Rs 30K was considered a hefty sum, OK now convert the salary to dollar terms. It is around some $1000. The same guy assume continuous to work in same MNC or would have switched to another company, he would have got his salary doubled at least in the 10 to 12 years period, his current package is rs 70K to 80k. Now convert his salary inot $ values its again 1000$, so what all he has done all the promotions etc has all not provided him any increase in emoluments, its the same package in $ terms. Compare the price of goods and other staples they have also increased in parallel to the $ value escalation or in terms of rupee value depreciation. We say inflation is like that, but here we need to see in addition to inflation rupee value also eroding consistently, so its a double blow. Thats why a person who keeps on getting 5 to 10 % increment yearly can o;ny meet the inflation rise but not able to meet the reupee value depreciation. Again this is all because the globalisation that we all are feeling proud of.

Attempting to find a solution to this problem, though its only my personal view. A individual can only have his savings in mode of INR only and only a few amount can be hold in terms of $. But MNC or foreign national companies has all freedom to save their savings or excess monies in terms of dollar and they are called hedge funds of their portfolio. They are cushioned and even silently reaping profits by parking their monies in $ terms, see the share price and worth of those companies who all are exporters, their profit has always been fulcrum by the dollar value appreciation and in INR terms its depreciation. MNCs are running their business in India and why should they be allowed to hold in dollar depreciating the INR value ? MNCs may argue its a public limited company and only to save the interest of the share holder they are parking their excess cash in $, but are they sharing the full profits with the share holder ? Second what is the % of shares available for trading of those companies in open share market ?

Doesn’t it sound odd that a citizen, Indian who pays taxes, elects the people representative and the one who makes the basis for the word country, means a country is nothing but its people? Such a individual is not allowed to hold his monies in $ or any foreign currency, but the MNC can hold it any foreign currency. I think this makes the citizens of the country a scape goat, he is plundered for his work, next his own currency is devalued by working for the company and he is also not allowed to hold his money in any other currency format.

Now considering all this i am afraid that its only after the globalisation and it all only because of the MNCs our currency value ges eroded and it all because of this we are suffering with no improvements in our lifestyle. If there is any global tension or internal political instability the rupee is sold off and $ is stored to save the wealth of MNCs bit we public donot have any such leveraging options. Recently there was a news that a south american country i hope is losing its currency value by 25% every month and people are fleeing that nation.

When its all clear that the cause of INR erosion is because of the MNCs hoarding the $ and dumping the INR, we all and all other labour unions should now start demanding one of the options either stop the MNC from holding $ and they should have all their monies in terms of the INR, or the public should also be allowed to hold their monies/savings in any foreign currency format as per their wish, let RBI bring those changes. If the first option is done i bet the INR will be back to Rs 20-25 range and even better, if second option is done then atleast from now one our savings will not erode and we can be atleast beat the rupee value erosion, one can ask what happens to INR then ?

According to me INR will be a virtual money, like a bitcoin, when needed we can convert our monies into INR and spend otherwise let be it in $ or any other foreign currency terms, why bother about INR it will still be an indian curreny with Gandhiji smiling on it, really (pun intended).

P.S: There may be many counters and arguments on this writeup, I viewed the dollar fluctuations from a guy who is a Indian and has not travelled out of India, and the impact on his savings.

But please feel free to comment and debate on this.

– Ravishankar

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