The upward journey of Rupee..!

There has been significant appreciation in the value of indian rupee in the last couple of months. It has appreciated close to 10% against dollar from its lows of 52 Rs/$ reached at the end of may.The rupee is expected to stabilize around 40Rs/$ by the middle of next year. This turnaround has been primarily due to huge inflows of dollars in the form of FIIs. A reform oriented government and the prospects of high returns has been able to attract foreign investors .Moreover, the stability of the indian economy amid this financial turmoil has made india one of the favoured destination for investments.

However,the appreciation of our currency has its own pros and cons. On one hand, it has made our imports cheaper and has been a boon for industries which import their raw materials from abroad. However, the appreciation has adversely affected our export competitiveness as our exports have to be priced higher in dollar terms due to decline in value of dollar against rupee. This makes it difficult to compete against other low cost manufacturers like china. Finally, such wide fluctuation in the exchange rates result in huge uncertainty and increase the cost of doing business.