The Rupee and Trading With India

Mish noted India wants to conduct more trade in Rupees.   If you're importing from India while the Rupee is loosing value, won't you loose the opportunity to make more money as the Indian goods will continue to cheapen?   The Indians will take the hit, right?  It's their currency that is being inflated away.   If you know a country's currency is losing value,  how does this influence your import decisions? 

Anthony

Ok, say you are buying a garment from India priced at  INR1000, then today you are paying US$14.79 each.

1 INR = 0.01476 USD  3 Sep 2013

You started trading with India in 2008...

1 INR =  .02184    25 Sep 2008   

http://www.xe.com/currencycharts/?from=INR&to=USD&view=5Y

So back in 2008, they cost you $21.84, so India’s travails make you happy, as an importer.

But now Indian importers are paying about 50% more for the same thing...  onions were $1 a pound, now a $1.50 pound.  Hence the onion crisis.

The policy was meant to make India grow by making India’s exports cheaper, so the country will grow.  Such policies expect that India will sell more, and nothing else will change.

The problem is that is not what happens.  India only gets less for what they were selling before, while the domestic economy pays more for less.

Feel free to forward this by email to three of your friends.

Bookmark this post --- Email this post