India added 20% of Pakistan GDP in 2 days to her economy.

HariPrasad-1

Senior Member
Joined
Jan 7, 2016
Messages
8,333
Likes
17,232
Country flag
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.


-HariPrasad.
 

HariPrasad-1

Senior Member
Joined
Jan 7, 2016
Messages
8,333
Likes
17,232
Country flag
If our GDP rises 7% and our currency grows by 5%, we shall end up in rise of Economy by 12%. On other hand China is depreciating its currency to stay competitive. This way the gap shall narrow between 2 currencies.
 

pringles

Regular Member
Joined
Feb 23, 2017
Messages
124
Likes
302
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.


-HariPrasad.
Our financial situation is actually much better than the numbers make it look in terms of its positive social impact. Because of the way the wealth (and opportunities of wealth creation) is distributed in India, the unfair advantage between the rich and poor is much less in India compared to US/ Chinese/ Russian oligarchs.

We are actually on the verge of the kind of large scale prosperity no Indian generation has ever seen in the history of our civilization. US, China, Russia, Japan are all facing an aging population. Where as every generation we produce will be more educated, more younger, more healthy, and richer than ever. These countries will have to import people, while we have surplus talent to export.
 

HariPrasad-1

Senior Member
Joined
Jan 7, 2016
Messages
8,333
Likes
17,232
Country flag
Our financial situation is actually much better than the numbers make it look in terms of its positive social impact. Because of the way the wealth (and opportunities of wealth creation) is distributed in India, the unfair advantage between the rich and poor is much less in India compared to US/ Chinese/ Russian oligarchs.

We are actually on the verge of the kind of large scale prosperity no Indian generation has ever seen in the history of our civilization. US, China, Russia, Japan are all facing an aging population. Where as every generation we produce will be more educated, more younger, more healthy, and richer than ever. These countries will have to import people, while we have surplus talent to export.
Exactly, We are all set to take on whole world in term of highly skilled manpower. Correctly, the R & D hub of all countries are moving to India. Chandrayan is a classical example of what India can do at a low cost which others can not do it by spending even 10 times higher money. We shall have a out right monopoly on IT and many other R & D areas. We shall lead in high tech manufacturing at a low cost. This is the reason that all multinational engaged in high tech products such as Planes and R & D in defense sectors to India to stay relevant. Cost effective R & D is not possible anywhere in world except in India.

TATA Tiago is an example of frugal Indian engineering after NANO. We are all set to make beautiful cars at a very low cost which others can not match. This will be true in many other areas including Plane engine in short time.
 

Mikesingh

Professional
Joined
Sep 7, 2015
Messages
7,200
Likes
28,939
Country flag
While it's encouraging to note the rise in the value of the rupee, however, some exports may take a slight hit like cement, petroleum products, heavy machinery, pharmaceuticals, iron and steel, textiles etc.
 

alphacentury

Senior Member
Joined
Nov 1, 2013
Messages
1,259
Likes
2,205
Country flag
I know zilch about economics and havent read the post fully yet (later), but if 2% appreciation adds some value then any depriciation or increase in dollar value wrt inr will make us cough up some amount, right? :confused1:
 

HariPrasad-1

Senior Member
Joined
Jan 7, 2016
Messages
8,333
Likes
17,232
Country flag
Indeed besides some fanboyism in past, @HariPrasad-1 was a very knowledgeable member, now he has started writing more maturely too.
If you point out my intensionaly than I am ready to discuss it except in few cases when I willfully trolled some Porkis, Chinks and sickular to make them fill uneasy in discussion. I have done that a lot of PDF also.
 

aditya10r

Mera Bharat mahan
Senior Member
Joined
Mar 19, 2016
Messages
5,701
Likes
11,481
Country flag
If you point out my intensionaly than I am ready to discuss it except in few cases when I willfully trolled some Porkis, Chinks and sickular to make them fill uneasy in discussion. I have done that a lot of PDF also.
Nice write up man

I can tell you one tell you one thing about Indian spending habits.
From. 2013 I am taking part in California superbike school Chennai....
In 2013,we had only 15 litre class bikes(bikes that cost 15l+) out of 120 bikes....
But this year, out of batch of 150 bikes we had 100+ litre class bikes............

Our spending habits are changing fast
 

no smoking

Senior Member
Joined
Aug 14, 2009
Messages
4,544
Likes
1,348
Country flag
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.

Unfortunately, not that simple.


If we check the long term economic performance of Modi gov by using your logic:

On 26/05/14, when Modi came into power, the rate was 58.6984 rupee/us$, yesterday (15/03/17) the rate was 65.5399, which means the rupee depreciated 11.6% since Modi came in. Can we make a conclusion based on this: India decreased her GDP by 11.6% while she was struggling to increase the GDP? Of course not, the relationship between exchange rate and GDP is quite complicated, there are lots other factors has to be considered.


India’s foreign exchange rate against

http://www.xe.com/currencycharts/?from=USD&to=INR&view=1Y


Sharply appreciating currency at the end of financial year will only make the reports look better, has no real effect on a country’s economic performance in the passing period, Indian people still produced same amount of products, consumed same amount of goods.


India trade deficit in past one year

http://www.tradingeconomics.com/india/balance-of-trade



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.

Again, too simplified.


Your logic only works on book value, but it is meaningless in reality because you are not going pay back the majority of your debt today or tomorrow. So, the benefit of saving won’t be realised until the date you pay back. And this benefit only exists in daily comparison which is again meaningless. If we make the comparison on yearly basis, I am afraid most of your debts have increased lot more in rupee term since the date they were borrowed.


Weapon and oil import:


….13000 crore Rupees.

Again, all these benefits are only on the book. Whether they can turn into real money depends on the future.


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.

“Easily absorb” doesn’t make the loss disappear (even it is on the book only), the loss will have to be taken by somewhere in the chain, either the exporters, their suppliers or the India employees.


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.



-HariPrasad.

You do realise that until 15/03/17 Rupee already depreciated 11.6% since this BJP government came in the office, right?

And if you look deeper, until 29/01/17, Rupee was still 68.12 against US dollar, which was 16% lower than the date he became PM. You know what happened in Jan? Trump moved in the white house and American started to depreciate dollar, and followed by every major countries.

So, it is not Modi government made this happen, it is Trump government.
 

HariPrasad-1

Senior Member
Joined
Jan 7, 2016
Messages
8,333
Likes
17,232
Country flag
If you point out my intensionaly than I am ready to discuss it except in few cases when I willfully trolled some Porkis, Chinks and sickular to make them fill uneasy in discussion. I have done that a lot of PDF also.
Correction:

If you point out my fanboyism than I am ready to discuss it except in few cases when I intentionally trolled some Porkis, Chinks and sickular to make them fill uneasy in discussion. I have done that a lot of PDF also. The fact of the matter is that I know something which others do not know. When I write this on forum, people thinks that I am a fanboy.

For example, when I wrote that kaveri is almost ready and faces one problem of noise, Kunal Bishwas was not ready to believe that. After few days, when the article was published in media and I quoted that, he said ok it seems true. same was the case when I wrote tejas faces aerodynamic of canopy and other aerodynamics issue and it is all set to correct it, people thought that I am a fanboy.

When I wrote that few years ago that Brahmos has a range of 600 KM and it travels faster than Mach 2.8, people said that I am a fanboy. They asked for the reference which I can not provide. Now it is turning out to be true.
 

HariPrasad-1

Senior Member
Joined
Jan 7, 2016
Messages
8,333
Likes
17,232
Country flag
“Easily absorb” doesn’t make the loss disappear (even it is on the book only), the loss will have to be taken by somewhere in the chain, either the exporters, their suppliers or the India employees.
Look , an interesting phenomenon is happening now. Rupee is getting stronger. Let us wait and see whether our export falls or not?
 

HariPrasad-1

Senior Member
Joined
Jan 7, 2016
Messages
8,333
Likes
17,232
Country flag
On 26/05/14, when Modi came into power, the rate was 58.6984 rupee/us$, yesterday (15/03/17) the rate was 65.5399, which means the rupee depreciated 11.6% since Modi came in. Can we make a conclusion based on this: India decreased her GDP by 11.6% while she was struggling to increase the GDP? Of course not, the relationship between exchange rate and GDP is quite complicated, there are lots other factors has to be considered.
It was artificially bought down for a short time period after it touched Rs 68 few months back and that rate was not sustainable. take the average of last six month and talk.
 

HariPrasad-1

Senior Member
Joined
Jan 7, 2016
Messages
8,333
Likes
17,232
Country flag
And if you look deeper, until 29/01/17, Rupee was still 68.12 against US dollar, which was 16% lower than the date he became PM. You know what happened in Jan? Trump moved in the white house and American started to depreciate dollar, and followed by every major countries.
Like the appreciation of rupee was a temporary phenomenon, in last days of UPA, Rupee going down was a temporary phenomenon because of Demonetization because people purchased Dollars with Rupees.

On January 31/01/2014, It was 62.5 INR against a USD.

New government could not reduce petrol price and diesel price proportionally because of rupee going down. In Vajpayee time, it was 44 against a USD which came down to 68 in the time of Pranab Mukharjee. Now it is rising and it is very good for economy.
 

Global Defence

New threads

Articles

Top