Finance, Forex and Investments

if the indian currency value increases there would be downfall in export market. instead of increasing value?

if the indian currency value increases there would be downfall in export marketand other major exporter countries will get benefit. instead of increasing currency value can't govt start some major projects of billion of $ in diff sectors like agriculture, transportation ,or poverty solution etc? inflation can be increase by levying taxes on goods, so would it work for getting our currency value stable n govt may use that money for above written purpose n we will never lose our foriegn buyers

Public Comments

1. Currency value is not increased by government. It is decided upon the the GDP, if there is inflation, your price rises, compared to others, hence your currency value comes down......when the inflation is in check and rises slowly, as compared to other country, say, USA, then your currency will rise and US currency will come down. Eg: supposing if currencies were equal (1 $ = 1 Re), then"X" product cost = 1 $ or 1 Re. Now if the production costs etc., doubles up in USA, the same "X" product cost 2 $, but assuming production cost is same in India, the cost would be Re.1. So now the equation becomes 2$ = 1 Re. So now with 1 Re I can get 2$, hence our currency value goes up, as we get more. As to exports, yes, the returns will be less when compared to the market which we are selling, If USA has inflation then the Re will be stronger and $ would be weak, and the $$ that we earn by export to USA would become less. However, if the European market is strong, we will get the same amount that we used to get before. So, the solution is to venture into new markets and also when your economy is boosting you should concentrate on local market, where you get more. PS: When a country's economy is booming, like in India presently, government get much more money due to increase in business, because when your profit increase, you pay more tax automatically,,,and these extra income to government can be utilised for other purposes - agriculture, transportation etc., Taxes cannot be just levied as and when required. There has to be valid reasons. Government can control inflation to only an extent. However, government has already provided many sops (discounts, duty cuts etc.,) to export items, so that they are competitive in overseas market. It is upto to the company to find other alternatives, like cost cutting, researching new and economical products etc., to be competitive and generate more income through higher sales in overseas and local market, and find new markets (where they get more returns).
2. no. by increase in rupee value export will not suffer. it is the sign of a stronger economy with less inflation.