The Indian Rupee-US Dollar Exchange

Rate: The Economic Impact of a

Strengthening Currency
In 2007, India experienced rapid appreciation of its currency against the US dollar.
The reasons for the appreciation of the rupee were a generally weak dollar in
international currency markets and sharp increase in dollar inflows into the country,
partly due to India's increasing attractiveness to foreign investors. Although India
had been seeing a steady rise in dollar inflows into the country for quite some time, on
earlier occasions, the Reserve Bank of India (RBI) had intervened in the foreign
currency market and purchased excess dollars so as to prevent any appreciation in
the value of the rupee. Now, the RBI decided not to intervene, mainly to control
inflation which was around 6 percent in early 2007.
The case discusses the reasons for the appreciation of the rupee and its possible
impact on the Indian economy. It also discusses the measures taken by the RBI and
the government to control rupee appreciation and to try offset the negative impacts of
a strong currency on the economy. The case ends with some views on the future
movement of the rupee.

The Indian Rupee-US Dollar Exchange

Rate: The Economic Impact of a
Strengthening Currency
The profitability of exporters has been wiped out and constant appreciation is
threatening the competitiveness of our product. If we lose the market, aggressive
competitors are just sitting on the fence to occupy the market. 1
- G.K. Gupta, President of the Federation of Indian Export Organizations
(FIEO),2 in October 2007
The government is concerned over the rapid appreciation of the rupee against the
US dollar and the central bank may have to intervene if there is disorderly movement
in the exchange rate.3
- P Chidambaram, Finance Minister of India, in September, 2007
The objective of the exchange rate management has been to ensure that the external
value of the rupee is realistic and credible as evidenced by a sustainable current
account deficit and manageable foreign exchange situation. Subject to this
predominant objective, the exchange rate policy is guided by the need to reduce
excess volatility, prevent the emergence of destabilizing speculation activities, help
maintain adequate level of reserves, and develop an orderly foreign exchange
market.4
- RBIs Policy in the Foreign Exchange Market

Introduction
In April 2007, on the back of a rising rupee, the Indian economy became a trillion
dollar5-economy, moving the country into an elite group of nations (Refer Exhibit I
for the List of Trillion Dollar Economies). By August 31, 2007, the Indian currency
was trading at 40.96 against the dollar, as compared to 46.55 on August 31, 2006, an
appreciation of around 12 percent (Refer Exhibit II for Rupee-Dollar Exchange
Rate Movement from August 2006 to August 2007).
The rise in the value of the rupee was a result of the general weakening of the dollar in
international markets, plus Indias growing attractiveness to foreign investors. In
2006-07, India attracted huge capital inflows in terms of foreign direct investment
(FDI),6 and foreign institutional investment (FII).7 External commercial borrowings

4
5
6

Exporters Seek Government Intervention on Rupee Rise, www.newspstindia.com,

October 1, 2007.
The Federation of Indian Export Organizations (FIEO) is a non-profit organization set up by
the Ministry of Commerce, Government of India in 1965, to coordinate and focus the efforts
of organizations engaged in export promotion in the country. (Source: http://fieo.org)
Rapid Rupee Appreciation is a Matter of Serious Concern: FM, www.newindpress.com,
September 27, 2007.
T.C.A. Ramanujam, Currency Crossfires, www.thehindubusinessline.com, June 27, 2003.
Dollar ($) denotes US dollars in this case study.
An investment made to acquire lasting interest in enterprises operating outside the economy
of the investor is called foreign direct investment (FDI). (Source: http://en.wikipedia.org)
Foreign institutional investment is a part of foreign portfolio investment which involves
holding securities such as stocks, bonds, or other financial assets by foreign investors. In
India, foreign institutional investors have to register with the Securities and Exchange Board

249

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(ECB)8 and non-resident Indian (NRI) deposits and remittances also contributed to the
dollar inflow.

Exhibit I
Trillion Dollar Economies as of 2006
S. No.
1
2
3
4
5
6
7
8
9
10

Country
United States
Japan
Germany
China
United Kingdom
France
Italy
Canada
Spain
Brazil

GDP*
(in million USD)
13,201,819
4,340,133
2,906,681
2,668,071
2,345,015
2,230,721
1,844,749
1,251,463
1,223,988
1,067,962

*GDP based on exchange rate in 2006.

India, together with Russia, became a trillion-dollar economy in early
2007
Source: World Bank, 2006
Although India had been witnessing strong dollar inflows for some time, the rupee had not
appreciated as steeply as it did between September 2006 and July 2007 mainly because on
earlier occasions, strong dollar inflows into India usually saw the Reserve Bank of India
(RBI)9, Indias central bank, intervene in the foreign exchange market and purchase excess
dollars so as to minimize volatility in the value of the rupee. This time around, the RBI
chose not to intervene, in order to keep domestic inflation, which had been hovering
around 6 percent in early 2007, in check.
While the RBI and the finance ministry were able to tame the inflation rate (inflation
fell to 3.52% in August, 2007), the rupees appreciation affected Indian exporters as
Indian goods became more expensive for foreign buyers. Information technology (IT)
and textiles industries were particularly hard-hit, as they were the most dependent on
the US. Leather, sugar, and plantation crops were some of the other sectors that were
starting to lose competitiveness. The Indian Micro, Small and Medium Enterprises
(MSMEs) were also affected. It was feared that falling export competitiveness would
cause substantial job losses.

of India (SEBI) to participate in the market. There are limits on the ownership by foreign
institutional investors in Indian companies.
ECBs include bank loans, suppliers and buyers credits, fixed and floating rate bonds
(without convertibility) and borrowings from private sector windows of multilateral
financial institutions such as International Finance Corporation. (Source:
www.banknetindia.com)
The RBI was established on April 1, 1935. Initially a shareholders bank, the RBIs
functions included regulating the issue of currency notes, maintaining reserves to ensure
monetary stability, and operating the credit and currency system of the country.

250

The Indian Rupee-US Dollar Exchange Rate:

Exhibit II
Indian Rupee-US Dollar Foreign Exchange Rate:
August 2006-August 2007

2006

2007

August
September
October
November
December
January
February
March
April
May
June
July
August

Exchange rate
(As on last day of the month)
46.55
45.96
45.02
44.76
44.23
44.17
44.31
43.59
41.29
40.73
40.75
40.44
40.96

Source: www.rbi.org.in.
On the other hand, the rupees appreciation against the dollar was a welcome
development for Indian importers, who were happy to pay less for their imports in
terms of rupees. Sectors which were neither net exporters nor net importers were
unaffected.
Analysts were divided in their opinion on the long-term effects of the rupees
appreciation against the dollar on the Indian economy. Some believed that as exports
as a percent of GDP are low in India, the rupees appreciation against the dollar,
though sure to impact exports, would not significantly affect the economy as a whole.
They were also confident that Indian exports would gradually regain competitiveness.
However, others were not so optimistic and were in favor of the RBI intervening in
the foreign exchange market.
In July-August 2007, the government of India announced measures to counter the
negative impact of the rupees appreciation on Indias exports. The RBI also started
buying dollars from the market to absorb the oversupply of dollars, indicating that the
rupee-dollar rate had crossed the comfort zone of the central bank.

Background Note
In India, the RBI had always played an active role in the foreign exchange market.
However, since the country faced a severe balance of payments (BOP) 10 crisis in the
10

The balance of payments (BOP) measures the payments that flow between any individual
country and all other countries. It is used to summarize all international economic
transactions for that country during a specific time period, usually a year. The BOP is
determined by the countrys exports and imports of goods, services, and financial capital, as
well as financial transfers. It reflects all payments and liabilities to foreigners (debits) and
all payments and obligations received from foreigners (credits).

251

International Business
early 1990s, there was a greater understanding of the importance of the rupee-dollar
exchange rate on the economy. With reserves down to only around $ 1 billion in mid1991, caused partly due to a fall in exports and also due to a decline in remittances
(following the Gulf war), the country was close to defaulting on its debt repayments.
The Indian government then negotiated with the IMF 11 for SDR12 of around $ 2 billion
to stave off any external debt crisis. 13 However, when the crisis deepened, the country
had to mortgage a part of its gold reserves with the Bank of England. In June 1991,
the rupee (Refer Exhibit III for some background information on the rupee) was
officially devalued by around 20 percent. In 1991, as part of its agreement with the
IMF, India liberalized its economy and following this, BOP stability was more or less
restored in the period, with foreign exchange reserves increasing to $ 9.2 billion by
end March 1992.

Exhibit III
The Indian Rupee: Background
The history of currency in India dates back to the 6 th Century B.C., when first
merchant guilds and later kings and chieftains issued silver coins as a medium of
exchange to facilitate trade. The rupee derived its name from the word
rupyakam meaning silver coin in the Sanskrit language. The forerunner to the
modern Indian rupee was introduced by Sher Shah Suri, a sixteenth century ruler.
The rupee, a silver coin weighing about 11.34 grams, was to remain the chief
currency of India till the early 20th century. One rupee was divided into 16 annas
and each anna was in turn divided into 4 paisa.
In the 1770s, private and semi-government banks issued the first currency notes in
India. Till 1835, the value of rupee varied from one state to another. With the
passage of Coinage Act in 1835, the value of the rupee became more uniform
across the country. Beginning in 1835, the East India Company started issuing a
series of coins. After 1857, the British crown took over the issue of currency.
In the 19th century, with the discovery of large silver mines in the US and parts of
Europe, the value of silver declined radically in comparison to gold. The rupee, as it
was defined in terms of silver, saw its value, vis--vis currencies that were pegged
to gold, decline. In 1898, the rupee was pegged to the British pound, with 15 rupees
making one pound. In 1920, the value of the rupee was increased, with 10 rupees
now equaling one pound. Again in 1927, the rupee value was brought down to 13.5
for one pound, which was to remain the exchange rate of the rupee till 1966.
After India achieved independence on August 15, 1947, the rupee was adopted as
the sole currency of the country. In January 1949, the Reserve Bank of India was
nationalized. That year, the rupee was devalued by 30.5 percent following the
devaluation of other currencies pegged to the pound. In 1957, the rupee shifted to
the decimal system, with one rupee now equaling 100 paisa.14

11

12

13
14

The International Monetary Fund (IMF) is an international organization that oversees the
global financial system by observing exchange rates and balance of payments, as well as
offering financial and technical assistance when requested.
The SDR or the Special Drawing Right is an international reserve asset created by the IMF
in 1969 to supplement the existing official reserves of member countries. Value of SDRs is
based on a basket of key international currencies. SDRs are allocated to member countries
in proportion to their IMF quotas. (Source: www.imf.org)
India joined the IMF on December 27, 1945 as one of IMFs original members.
The Indian rupee follows the Indian numbering system. The ancient system groups numbers
by two decimal places rather then three decimal places as is done in the western system. For
example, three hundred thousand (300,000) would be three lakhs (3,00,000), thirty million

252

The Indian Rupee-US Dollar Exchange Rate:

In June 1966, the rupee was devalued by 57.5 percent and its exchange rate against
the dollar was set at 7.50, compared to 4.76 prior to the devaluation. In August
1971, with the Bretton Woods System (The Bretton Woods system involved
member countries agreeing to an exchange rate system where each currency traded
within defined parities with the US dollar) breaking down, the rupee was pegged to
the dollar, with the rupee-dollar exchange rate continuing at 7.50. However, after
the dollar devalued on December 18, 1971, the rupee was again pegged to the
pound on December 20, 1971, with Rs 18.967 equal to one pound. When the pound
was floated on June 23, 1972, the rupee depreciated again. In 1975, the rupee was
linked to a basket of currencies of Indias major trading partners the dollar, the
pound, the yen, the Deutsche mark, and the Italian lira. To express the value of the
rupee, the pound was used by the RBI as reference currency. The RBI declared the
official rate of the rupee against the pound on a daily basis.
In 1978, the Indian rupee was given the official ISO 4217 abbreviation of INR IN
for India and R for Rupee.
In March, 1992, the government of India announced full convertibility of the rupee
in the current account. As of 2007, the government was considering full
convertibility of the rupee in the capital account as well.
Compiled from various sources
In March, 1992, the Liberalized Exchange Rate Management System (LERMS) was
introduced under which a dual exchange rate 15 was adopted. In March 1993, the
LERMS was replaced by the unified exchange rate system and the system for setting
exchange rates changed from a controlled system to a managed float system.16 In
1993-94, the rupee was made freely convertible for trading, but not for investment
purposes.
After liberalization, Indias exchange rate policy focused on managing the fluctuation
of the rupee-dollar exchange rate and at the same time allowing the demand and
supply conditions to determine the exchange rate. Post-1991, the RBI intervened in
the foreign exchange market whenever it deemed necessary and took suitable
measures to counter speculative pressures on the rupee and maintain stability in the
foreign exchange market, also with an eye to maintaining Indias external
competitiveness. It purchased or sold dollars in order to reduce the excess supply of or
excess demand for dollars.
From 1991 to 2002, the rupee depreciated steadily against the dollar, from Rs 17.94 to
Rs 48.15. This happened despite foreign exchange inflows that increased the foreign
exchange reserves of the country from $ 5.8 billion to $ 51.05 billion during the
period. The reserves grew in large part due to a healthy increase in exports (from $
18.48 billion to $ 44.91 billion 17). Growth in private transfers, especially remittances
from migrant workers, increased manifold from $ 2.08 billion to $ 12.19 billion.

15

16

17

(30,000,000) would be three crores (3,00,00,000), and three billion (3,000,000,000) would
be three arabs (3,00,00,00,000).
In a dual exchange rate system, both fixed and floating exchange rates are applied in the
market. The fixed rate is applied only to certain segments of the market such as imports and
exports, and/or current account transactions, and a market-driven (floating) exchange rate is
applied to capital account transactions. (Source: www.investopedia.com)
Managed float regime is the current international financial environment in which exchange
rates fluctuate from day to day, but central banks attempt to influence their countries
exchange rates by buying and selling currencies. It is also known as a dirty float. (Source:
http://en.wikipedia.org)
Harish Damodaran, Forex Reserves: From Penury to Plenty, www.blonnet.com,
November 29, 2002.

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International Business
Export earnings from the software sector increased from practically zero in 1992-93 to
$ 7.17 billion in 2001-02. Foreign capital inflows in the form of FII and FDI also
contributed to the growth in foreign exchange reserves.
Between January 2003 and March 2004, the rupee began to steadily appreciate against
the dollar. In 2004, the period between March and November was marked by
fluctuations in the exchange rate. From December 2004 to September 2005, the
exchange rate remained at more or less the same levels. The next year was again a
period of fluctuating exchange rates. From September 2006, the rupee again began to
appreciate against the dollar (Refer Exhibit IV for rupee-dollar exchange rate from
1998 to July 2006).

Exhibit IV
Indian Rupee-US Dollar Foreign Exchange Rate*: 1998-2006
1998

1999

2000

2001

2002

2003

2004

2005

2006

January

39.39

42.55

43.59

46.61

48.35

47.96

45.46

43.62

44.20

February

39.01

42.53

43.65

46.56

48.72

47.75

45.27

43.58

44.23

March

39.57

42.52

43.64

46.65

48.77

47.68

44.97

43.59

44.34

April

39.70

42.80

43.68

46.79

48.94

47.39

43.89

43.64

44.82

May

40.47

42.86

44.08

46.95

49.02

47.11

45.18

43.41

45.20

June

42.37

43.21

44.76

47.04

48.98

46.70

45.50

43.52

45.89

July

42.61

43.36

44.84

47.18

48.79

46.22

46.06

43.43

46.37

August

42.84

43.50

45.77

47.17

48.62

45.96

46.32

43.55

September

42.58

43.60

45.97

47.75

48.46

45.85

46.05

43.85

October

42.39

43.55

46.43

48.05

48.39

45.40

45.74

44.76

November

42.43

43.46

46.82

48.04

48.29

45.55

45.03

45.63

December

42.59

43.52

46.78

47.93

48.15

45.57

43.85

45.56

*As on last day of every month.

Source: www.economagic.com.

Reasons behind the Appreciation of the Rupee in 2006-07

Toward the end of 2006, foreign exchange inflows, especially of dollars, into India
started rising sharply. This put upward pressure on the rupees exchange rate against
the dollar. Indias steady economic growth offered several opportunities for foreign
companies. Between April 2006 and March 2007, FDI of $ 16 billion flowed in to
India. This was around three times the preceding years figure. More than 50 percent
of these inflows arrived between December 2006 and March 2007. By August 24,
2007, Indias foreign exchange reserves had increased to a record $ 228.8 billion
(Refer Exhibit V for Indias foreign exchange reserves between 1991 and 2006).
Indias booming stock market contributed to the foreign exchange inflows. In 200607, FII inflows increased by 61 percent (year-on-year) to touch $ 105.8 billion. The
net FII inflows for the year were $ 7.99 billion. In the first five months of 2007-08, net
FII inflows crossed $ 8.4 billion. Portfolio capital inflows also came from overseas
254

The Indian Rupee-US Dollar Exchange Rate:

equity issues of Indian companies via global depositary receipts (GDRs) 18 and
American depositary receipts (ADRs). 19 Inflows from GDRs and ADRs amounted to $
3.8 billion in 2006-07 with a year-on-year increase of 48 percent.

Exhibit V
Indias Foreign Exchange Reserves between 1990-91 and 2005-06

Source: Report on Foreign Exchange Reserves, www.rbi.org.in, July 14, 2006.

Apart from the equity issues, several Indian companies borrowed massive amounts of
money, mostly in dollars, from abroad to fund investments and acquisitions in India,
and this also contributed to the dollar inflows. The first quarter of 2007-08 (AprilJune) recorded ECBs of $ 48.3 billion, an increase of 12.9 percent compared to the
first quarter of the previous year.20
Another major source of capital inflows was non-resident Indian (NRI) deposits in
bank accounts in India. As Indian banks offered higher interest rates on deposits than
overseas banks, NRIs preferred to invest in India. The NRI deposits stood at $ 42.6
billion as of June 2007.21 Remittances from Indians working overseas also saw an
increase to reach $ 27.2 billion in 2006-07 compared to $ 24.1 billion in 2005-06
(Refer Exhibit VI for remittances to India between 1990-91 and 2005-06, and
Exhibit VII for the source regions of remittance flows to India in November
2006).
18

19

20

21

Global depositary receipt or GDR is a bank certificate issued in more than one country for
shares in a foreign company. The shares are held by a foreign branch of an international
bank. The shares trade as domestic shares, but are offered for sale globally through the
various bank branches. (Source: www.investopedia.com)
American Depositary Receipt or ADR is the ownership in the shares of a foreign company
trading on US financial markets.
Indias External Debt as at the End of June 2007, http://rbidocs.rbi.org.in, September 28,
2007.
Indias External Debt as at the End of June 2007, http://rbidocs.rbi.org.in, September 28,
2007.

255

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Exhibit VI
Remittances to India in Billions of US Dollars, 1990-1991 to 2005-2006

Source: Muzaffar A. Chishti, The Phenomenal Rise in Remittances to India:

A Closer Look, www.migrationpolicy.org, May 2007.

Exhibit VII
Source Regions of Remittance Flows to India in November 2007

North America

Europe

East Asia

Others

Africa

Gulf countries

South America

Source: Muzaffar A. Chishti, The Phenomenal Rise in Remittances to India: A

Closer Look, www.migrationpolicy.org, May 2007.
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The Indian Rupee-US Dollar Exchange Rate:

Export growth also contributed to Indias increasing foreign exchange reserves. IT
and business-process outsourcing (BPO) exports increased rapidly in 2006-07 to cross
$ 31.9 billion, a year-on-year increase of around 32 percent.
Some analysts were of the view that the slowdown in the US economy was the primary
reason for the dollar inflow into emerging economies, including India. According to
Avinash Vashistha, MD, Tholons, a global services and investment consulting firm, This
scenario will continue considering that India is booming and interest rates are high here,
while the US economy is facing a slowdown and interest rates are falling.22 The dollar
also depreciated against other major currencies. Between August 2006 and August 2007,
the euro appreciated against the dollar from 0.78 to 0.73, the British pound appreciated
from 0.53 to 0.49, and the yen appreciated from 117.35 to 115.83.
The sub prime mortgage crisis in the US was another reason for the large dollar
inflows in to India. While the U.S. has managed such monetary fluctuations in the
past (sub prime crisis), in the present context, there are impacts on India and other
emerging markets and the government will carefully study the rupee movement and to
what extent we can stand the current liquidity surge and hot capital inflow, with
overseas financial institutions looking here for better returns, said Parthasarathi
Shome, Advisor to the Union Finance Minister. 23 The increase in oil prices resulted in
increased liquidity in the Gulf countries, and some of this was also believed to be
being diverted to India.
The increased inflow of dollars into the Indian market certainly put upward pressure
on the rupee. This upward pressure was not neutralized, because the RBI, which till
late 2006 had been following the policy of managed float in the foreign currency
market, decided in September 2006 to stop intervening in the foreign exchange
market. Apparently, the RBIs decision not to intervene was taken in order to control
the inflation rate, which had begun to be a cause of concern to the central bank as well
as the government. In early 2007, the inflation rate, as measured by the wholesale
price index (WPI)24, hovered around 6-6.8 percent, well above the level of 5-5.5
percent acceptable to RBI. On February 15, 2007, inflation reached a two year high of
6.73 percent (Refer Exhibit VIII for the inflation rates between August 2006 and
August 2007). By allowing the rupee to appreciate, the RBI hoped to control inflation
by making imported goods cheaper. Also, the rise in the value of the rupee was
expected to make some Indian export items, especially food products, less competitive
in overseas markets, thus forcing exporters of these products to release them in the
domestic market. This was expected to increase the supply of goods and bring down
domestic prices.
Previously, whenever there had been upward pressure on the rupee, the RBI would
buy dollars from the market. This resulted in an equivalent amount of rupees being
released into the domestic market (as domestic money supply is related to the RBIs
reserve holdings). To absorb this oversupply of rupees, the RBI had been selling
government bonds under the market stabilization scheme (MSS). However,
sterilization, as this process was called, led to the oversupply of government bonds in
the market thus bringing down their prices. As bond prices share an inverse relation
with interest rates on bonds, any fall in bond prices would translate to higher interest
22

23
24

Mini Joseph Tejaswi, Rupee Appreciation to Hit Software Cos,

www.economictimes.indiatimes.com, March 29, 2007
Tackling U.S. Sub-prime Crisis in India, www.hindu.com, October 6, 2007.
The Wholesale Price Index (WPI) is the index that is used to measure the change in the average
price levels of goods (both agricultural and industrial) traded in the wholesale market (compared
to the base year 1993-94). In India, the WPI is taken as the indicator of the rate of inflation and
includes in all 435 items.

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International Business
rates. And the increase in interest rates attracted more capital inflows from abroad,
with the RBI forced to repeat the sterilization process. This unending process was
another reason why the RBI decided to stop intervening in the foreign exchange
market.

Exhibit VIII
Inflation Rates in India
Year

Month

Inflation rate* (In %)

2006

October

5.09

November

5.30

December

5.58

January

6.58

February

6.10

March

5.74

April

5.66

May

4.85

June

4.27

July

4.45

August

3.52

2007

* As of last week of the month

Source: http://finmin.nic.in.
The trend of steady month-on-month appreciation of the rupee began in September
2006 and continued through the first eight months of 2007. By August 2007, the
rupee-dollar exchange rate reached 40.63, from 46.45 in August 2006.

Effects on the Economy

The rupees appreciation against the dollar was seen to be beneficial to the Indian
economy in some ways, and detrimental in other ways. The rise in the value of rupee
meant that inflation was curbed. The inflation rate in India declined from 6.73 percent
in February 2007 to 4.10 percent in August 2007. A strengthening rupee brought
down the price (in rupee terms) of food products. A serious supply shortage of food
products was believed to be the primary reason behind the inflation rate increasing in
the first half of 2007. The rupees appreciation also cushioned the impact of
increasing crude oil prices in the international market.
The rupees appreciation also benefited importers as well as manufacturers who
depended on imported raw materials. Companies in sectors such as oil and gas,
automobile, engineering and aviation were able to import items at much cheaper rates
(in rupee terms) than before. As the procurement prices of oil companies depended on
international crude oil prices, which were denominated in dollars, the rupees
appreciation absorbed some of the international price escalation. This was a welcome
development as the public sector oil companies had been incurring losses 25. The dent
25

In India, the retail price of petrol and diesel is determined by the government. Owing to
political compulsions, the government had more or less frozen petrol and diesel prices. With

258

The Indian Rupee-US Dollar Exchange Rate:

would have been larger had not the rupee appreciated,26 a senior oil company official
said.
Similarly, companies importing cement saw their net payments (in rupees) for imports
reduce. The capital goods sector also benefited.
As with oil, in the case of some other commodities too, the rupees appreciation
reduced the impact of increases in their international prices. The currency appreciation
was also a positive for the governments financials. The rupees appreciation reduced
Indias external debt. As on December 2006, India had an external debt of $ 142.65
billion which decreased to $ 132.66 billion following the rupees appreciation.
Companies that had borrowed in dollars from international banks also benefited from
the rupees appreciation as the rupee value of the loans decreased.
As a result of the rupees appreciation, Indian tourists traveling abroad saw their
rupees stretch a bit further than before. Vishal Suri, COO of Thomas Cook India, said,
Though no immediate effect is seen in travel packages, it (rupee appreciation) will
give Indians the freedom to spend more while traveling. The overall sentiment is
going to be positive for all markets, be it the US, Far East or Europe, as most
destinations have dollar as a common currency for conversions. 27
However, the rupees rise against the dollar was beginning to have an adverse impact
on the Indian export sector. Around 86 percent of Indian exports and 89 percent of
imports were denominated in dollars (2005-06 data)28 and with the rupee
strengthening against the dollar, Indian products were becoming more expensive in
overseas markets, thus adversely affecting their international competitiveness. The
cumulative export growth for the period April-August 2007 declined to around 18
percent, compared to around 24 percent in the corresponding period in 2006. The
RBIs deputy governor, Rakesh Mohan, referred to the effects of the rupees
appreciation on the countrys export sector as a case of Dutch disease. 29
According to an Associated Chambers of Commerce and Industry of India
(ASSOCHAM) study,30 the export sectors affected most as a result of the appreciation
of the rupee were IT and IT-enabled services, textiles, leather, and sugar. 31 The
rupees appreciation also affected the profitability of exporters of meat and spices.
The pharmaceutical sector was also moderately affected.

26

27

28

29

30

31

increase in the international price of crude oil, the losses incurred by the public sector oil
companies were mounting.
Richa Mishra, Oil Cos: Rupee Gain Softens Impact of Crude Prices,
www.thehindubusinessline.com, May 23, 2007.
Shubhra Tandon, Re Appreciation a Boon for Outbound Tourism,
www.thehindubusinessline.com, September 22, 2007.
Indian exports and imports in euros accounted for 8 percent and 7 percent respectively of all
exports and imports.
The term Dutch Disease was coined by The Economist in 1977 to describe the decline of the
manufacturing sector in the Netherlands after the discovery of natural gas in the 1960s. The
economic model describing Dutch disease was later developed by W. Max Corden and J.
Peter Neary in 1982. The model describes Dutch Disease as the adverse effect on any
sector(s) of an economy caused by large inflow of foreign currency in to the economy and
appreciation of the domestic currency.
The Associated Chambers of Commerce and Industry of India (ASSOCHAM) was
established in 1920 by promoter chambers representing all regions of India. It is Indias
premier apex chamber with membership of over 100,000 companies and professionals
across the country. (Source: www.assocham.org)
Rupee Appreciation to Result $15 bln Fall in Exports in 2007-08, www.indiantaxsolutions.com,
July 7, 2007.

259

International Business
As a high percentage of revenues in most IT and some pharmaceutical companies
were in dollar terms, any appreciation of the rupee affected their revenue realization
and consequently their profit margins. V Balakrishnan, Chief Financial Officer of
Infosys Technologies Ltd (Infosys),32 said, In spite of taking forward cover and
hedging $ 373 million during the quarter under review, the rupee appreciated to Rs
44.53 from Rs 46.29 and impacted our operating margins by 200 base points (two
percent) and led to a revenue loss of Rs 1.45 billion. 33
According to US Department of Commerce data, Indias textile and apparel exports to
the US declined by 0.21 percent in the first half of 2007, even when USs total textile
imports increased by 5.70 percent in the same period. China was able to increase its
textile exports to the US by 33.78 percent, Vietnam, by 21 percent, Cambodia, by 18.5
percent, Indonesia, by 16.5 percent, and Bangladesh, by 13.6 percent 34 (Refer Exhibit
IX for the exchange rate of dollar against currencies of some of Indias
competitors).

Exhibit IX
The Exchange Rate of Dollar against Currencies of some of Indias
Export Competitors: August 2006-August 2007
Country

Currency

Exchange rate against dollar

August 2006

August 2007

Appreciation in %

Pakistan

Pakistan Rupee

60.310

60.642

(-0.55)

Bangladesh

Taka

69.110

68.775

0.48

China

Renminbi Yuan

7.958

7.547

5.16

Sri Lanka

Sri Lankan Rupee

102.51

113.01

(-10.24)

Vietnam

Dong

16,010

16,236

(-1.41)

Indonesia

Rupiah

9101

9389.6

(-3.17)

Malaysia

Ringgit

3.680

3.501

4.86

Source: www.x-rates.com and www.gocurrency.com.

In the 11th Five Year Plan, the Indian government had set an apparel export target of 6
billion pieces at $ 34.02 billion by 2011-2012. However, according to Amit Goyal,
President of Confederation of Indian Apparel Exporters (CIAe) 35, with the rupee
appreciating against the dollar, India would not be able to reach the export level of
even the previous year.36 He also said that considering the fact that employment in the
sector depended directly on export orders, the decline in export orders would
adversely affect employment in the sector. Prakash Thakkar, Managing Director of Jal
32
33

34

35

36

Infosys Technologies Ltd. is a leading provider of consulting and IT services globally.

A Record Appreciation of the Indian Rupee in the Forex Market by 3.8 Percent Dampening
IT Outsourcing Margins, www.indiadaily.com, January 11, 2007.
Sanjeev Choudhary, Rise in Rupee, Sluggish Sales Take Toll on Apparel Exports to US,
www.economictimes.indiatimes.com, August 27, 2007.
The Confederation of Indian Apparel Exporters or CIAe is an industry association of
garment exporters, set up in 2001.
India: Apparel Exporters Reel under Severe Order Crunch, CIAe, www.fibre2fashion.com,
October 11, 2007.

260

The Indian Rupee-US Dollar Exchange Rate:

Exports, said, I am willing to close down. In fact, I have started to reduce my
business, reduce my staff to ensure a smooth exit from the apparel export businessI
believe the worst is yet to come.37
The strengthening of the rupee against the dollar also affected exporters of plantation
crops. Monthly tea exports declined from 106.6 million kg in January 2007 to 86.1
million kg in July 2007. Coffee exports also fell from 199,761 tons in JanuarySeptember 2006 to 176,699 tons in January-September 2007. Ashok Kurian,
Chairman of the Specialty Coffee Association of India, said, Nearly 80 percent of 3
lakh (300,000) ton coffee produced annually in India is exported. We do not have a
strong domestic market and our dependence on the export market exposes us to
currency fluctuations.38
The rupees appreciation made Indian cashew exporters vulnerable to competition
from Vietnam and Brazil; and Indian sugar companies lost export orders to companies
based in China and Thailand. With the rising rupee, Indian pharmaceutical companies
too were expected to lose their competitiveness to Chinese and East European
companies.
The rupees appreciation also affected the export competitiveness of the MSMEs,
which accounted for around 34 percent of national exports. According to the
Confederation of Indian Industrys (CII) 39 19th Business Outlook Survey, more than
50 percent of the respondents from MSMEs expected a negative impact on their
business because of the appreciation of the rupee. 40
Employment in various export sectors was expected to decline. According to the study
commissioned by the commerce ministry, the rupees appreciation resulted in 11,000
job losses in the textiles and garment sector and 1,900 job losses in the leather sector
in March-June 2007.41
However, companies that were both importers and exporters were not hurt by the
appreciation of the rupee. For example, the gems and jewelry sector, which imported
unpolished gems and bullion metals and exported polished gems and jewelry, seemed
to have withstood the impact of rupee appreciation.
With the rise in the value of the rupee, foreign tourists found it more expensive to
come to India. This was expected to have a negative impact on the tourism industry.
According to Himmat Anand, Chief Operating Officer of SITA42 in India & South
Asia, The weak dollar is bound to affect the inbound travel, which can become less
attractive for travelers.43
37

38
39

40

41

42

43

India: Apparel Exporters Reel under Severe Order Crunch, CIAe, www.fibre2fashion.com,
October 11, 2007.
Coffee, Tea Exporters Feeling Rupee Rise Heat, www.livemint.com, September 27, 2007.
The Confederation of Indian Industry (CII) was founded in 1895. It is a non-government,
not-for-profit, industry led and industry managed organization. It has direct membership of
over 6,500 organizations from the private as well as public sectors, including SMEs and
MNCs, and an indirect membership of over 90,000 companies from around 350 national and
regional sectoral associations. (Source: www.ciionline.org)
India: Rupee Appreciation Unable to Stem MSME Export, www.fibre2fashion.com,
October 2, 2007.
Mahendra Kumar Singh, Strong Re May Shave off USD 13b Exports,
www.timesofindiaindiatimes. com, July 26, 2007.
SITA Inbound is one of the largest Indian companies in the tourism industry. It operates
inbound tours to India from all over the world, with tour operations and marketing activities
centralized at their head office in New Delhi. (Source: www.sitaindia.com)
Shobha Kannan, Strong Re, Overpricing Likely to Hurt Inbound Tourism,
www.thehindubusinessline. com, October 9, 2007.

261

International Business

Some Perspectives
The trilemma or the impossible trinity as economists sometimes called the
management of exchange rate, interest rate, and inflation rate, has always posed
problems for central banks the world over; and the RBI was not an exception. The
central bank of any country has to ensure that the interest rates keep inflation in check,
but at the same time do not stifle investment; the exchange rate promotes exports, not
stifle them; and lastly the exchange rate and the interest rate manage capital inflows
without restricting them. This was a challenge for the central banks of even the highly
developed economies of western countries. However, analysts were of the view that,
largely, the RBI had been managing the trinity quite well for the last few years, at
least until inflation levels started rising in early 2007.
Most analysts were of the view that the RBIs first priority should be to rein in
inflation and they supported RBIs policy of non-intervention in the foreign exchange
market. However, some were of the view that the RBI should have let the rupee
appreciate gradually rather than leave the rupee to the mercy of market forces. Citing
the example of China, analysts explained that though that country attracted far more in
foreign investment than India, its currency appreciated only by around 2% (between
March and July 2007).
Some analysts were of the view that the rupees appreciation was positive as it would
put pressure on exporters to improve, update, and modernize. They cited the example
of the Japanese export industry in the 1990s, when it faced an appreciating yen, from
nearly 230 yen to a dollar to around 130. The Japanese export industry responded by
improving its productivity and introducing product innovations. Indian exporters, they
said, too should view the rupees appreciation as a challenge. They however agreed
that the government had a significant part to play and should invest in infrastructure as
well as in education and training of human resources. Kamal Nath (Nath), Minister of
Commerce & Industry, while agreeing with exporters that the appreciation of the
rupee against the dollar was a major concern, asked them to make efforts to improve
efficiency. He said, Rupee rise is no doubt a problem, but it is also an opportunity for
all of you to move towards greater efficiency, reducing costs and enhancing
competitiveness.44 However, in July 2007, he announced some measures to offset the
negative impact of rupees appreciation on Indias exports (Refer Exhibit X for the
recommendations of the Ministry of Commerce).
Some analysts advised exporters to decrease their dependence on dollars, asking them
to shift their invoicing to more stable and balanced currencies like the British pound
(Refer Exhibit XI for the exchange rate of the rupee with some major currencies
between January 2007 and August 2007). Others felt that exporters should reduce
their dependence on the US market. Commenting on a possible way out for textile
exports, D K Nair, Secretary General of Confederation of Indian Textile Industry
(CITI)45, said, It is evident that the textile industry has to cope up with the rupee
appreciation and for that defocusing of the US market and currency is one strategy
that the industry will have to adopt. Few industry players are already looking for other

44

45

Kamal Nath Announces Package to Counter Impact of Rising Rupee on Exports-Assures

Exporters of All to Reach Export Target of US $ 160 Billion, www.commerce.nic.in, June
13, 2007.
Confederation of Indian Textile Industry (CITI) is a trade association of cotton, blended and
man-made yarn spinning mills and fabric manufacturers. (Source: www.citiindia.com)

262

The Indian Rupee-US Dollar Exchange Rate:

markets and trying to do business in other currencies. 46 Still others advised exporters
to go for hedging in order to minimize impact of a sharp rise in the exchange rate.
Puneet Chaddha, Country head Commercial Banking, HSBC, 47 said, The time has
finally come that companies need to respond with interesting hedging strategies which
would benefit them, in an appreciating rupee environment. 48

Exhibit X
The Recommendations of the Ministry of Commerce in July, 2007
1. Duty Entitlement Pass Book (DEPB) and Duty Drawback rates may be
enhanced by 5%.
2. Rate of interest on pre-shipment and post-shipment credit be reduced for
exporters to 6% (at present, the rate of interest charged is in the range of 9 to
11%).
3. Exchange Earners Foreign Currency (EEFC) Accounts may be made interest
bearing. (As on date, EEFC Account deposited is stated as current account and
interest on it discontinued since 2000).
4. Scheduled Commercial Banks may be mandated to meet 15% export credit
disbursement target.
5. Notify the Service Tax Exemption / Refunds for exports announced in the
Foreign Trade Policy 2007 without further delay.
6. All arrears of TED (Terminal Excise Duty) & CST (Central Sales Tax)
reimbursement would be cleared by 30th June, 2007 and the Ministry of
Finance will be requested to provide additional funds, if necessary.
7. Export Credit & Guarantee Corporation (ECGC) will reduce its premium rates
by upto 10% to make exports more competitive.
8. A Committee is also being set up to assess job losses due to rupee appreciation
and loss of export orders.
Source: Kamal Nath Announces Package To Counter Impact Of Rising Rupee On
Exports-Assures Exporters Of All To Reach Export Target Of US $ 160 Billion,
www.commerce.nic.in, June 13, 2007.
With the rupees appreciation, considering its overall trade deficit (imports of $ 190
billion against exports of $ 126 billion in 2007), Indian economy was a net gainer.
Analysts saw this as a benefit of currency appreciation. However, others were of the
view that this was a short term gain and continuous appreciation of the rupee was
detrimental for the economy as there would be considerable job losses.
Some analysts were in favor of the rupees appreciation. They were opposed to giving
too much importance to exports. They added that as India itself was a huge market,
with exporters of other countries looking at Indian markets with interest, Indian
exporters should make efforts to develop the domestic market. Domestic
consumption, according to them, would obviate the need to depend on exports for job
creation.
46

47
48

India: Textile Industry Must Cope with Rupee Appreciation CITI,

www.yarnsandfibers.com, October 2, 2007.
HSBC is one of the largest banking and financial services organizations in the world.
Firms Look at Ways to Control Effects of Re Appreciation,
www.economictimes.indiatimes.com, October 4, 2007.

263

International Business

Exhibit XI
The Exchange Rate of Rupee against some Major Currencies
between January 2007 and August 2007
Currency

Exchange rate

Appreciation

January 2007

August 2007

Pound

86.594

82.005

5.29

Euro

57.450

55.419

3.53

Yen (100)

365.234

350.673

3.98

Australian Dollar

34.166

33.110

3.09

Canadian Dollar

37.473

38.432

(-2.55)

Source: www.x-rates.com and www.gocurrency.com.

Some were of the view that Indian companies as well as the government could ease
the upward pressure on the rupee by investing in assets abroad. The central bank had
been easing restrictions on outward investment, with total international assets of India
in the last five years (between 2001-02 and 2006-07) increasing at an annual
compound rate of 24.2%. However, there was room for further liberalization of
norms. Others felt that as the continued appreciation of the rupee was expected to
make ECBs more attractive for Indian companies, even at an unchanged interest rate
differential, the RBI should impose tighter restrictions on ECBs so as to control dollar
inflows.

Outlook
In June, 2007, the Economist Intelligence Unit 49 estimated that for the year 2007, the
rupees average annual exchange rate against the dollar would be 41.3 (a 13.5 percent
real appreciation year on year), and for the year 2008, it would be 40 (6 percent). 50
In the third week of September, 2007, the US Federal Reserve cut interest rates. This
saw FIIs flock to emerging markets, including the Indian market. Between midSeptember and mid-October 2007, over $ 6.6 billion was injected into the Indian
market.51
In September, 2007, in an effort to placate exporters, the government reimbursed
service tax paid by exporters for port, road transport and rail services (Refer Exhibit
XII for the measures taken by the government). However, exporters were not
satisfied with the announcement, saying it was too little too late. Ganesh K. Gupta,
President of FIEO, said, The packages announced by the government [have] not been
able to offset our losses. The way the rupee is rising, it would be negating not only the
exports but wipe them out. I think now it is time the Prime Minister intervenes and
takes up the matter seriously.52

49

50
51
52

The Economist Intelligence Unit, founded in 1946, is a leading research and advisory firm,
with more than 40 offices worldwide.
India Finance: Rupee Dilemma, www.viewswire.com, June 26, 2007.
2007 FII Inflows Hit $16 Billion, www.indianexpress.com, October 12, 2007.
Steps Soon to Address Rupee Appreciation: Kamal Nath, www.andhracafe.com,
September 20, 2007.

264

The Indian Rupee-US Dollar Exchange Rate:

Exhibit XII
The Measures taken by the Government
1.

Increasing the number of Services for refund/exemption of Service Tax in

respect of Exports.

The list was expanded to include three new services general insurance service,
technical testing and analysis service, technical inspection and certification service.
Exporting community was to be exempted from paying service tax for these
services.
2.

Provision to pay Interest on EEFC balances.

The government decided to allow interest to be paid on Exchange Earners Foreign

Currency (EEFC) accounts.
Interest should be permissible on outstanding balances to the extent of $ 1
million per exporter
Rate of interest may be determined by the banks.
This measure would be valid up to October 31, 2007.
Such accounts should be in the form of term deposits with a maturity of up
to one year.
3.

Interest on pre-shipment and post-shipment credit (extension of period &

widening of coverage of sectors).
The applicable interest rate on pre-shipment credit up to 180 days and postshipment credit up to 90 days was Benchmark Prime Lending Rate (BPLR) minus
2.5%. In July 2007, the government announced a reduction of this maximum rate to
BPLR minus 4.5% in respect of the outstanding amount for the period April 1 to
December 31 in 2007. The government agreed to provide the requisite interest
subvention of 2% points to scheduled commercial banks. This dispensation was
made available to the sectors of textiles including handlooms and readymade
garments, leather products, handicrafts, engineering products, processed
agricultural products, marine products, sports goods, toys and all exporters from the
SME sector. Now, it was decided that the coverage would be expanded to the
sectors of jute and carpet, processed cashew, coffee and tea, solvent extracted deoiled cake and plastics and linoleum. The period for which the reduction in the
interest rate is applicable, is now extended from December 31 to March 31, 2008.
The amount of subvention will be calculated on the amount of export credit from
the date of disbursement up to the date of repayment or up to the date beyond
which the outstanding export credit becomes overdue i.e. for pre-shipment credit
up to 180 days and post-shipment credit up to 90 days, whichever is earlier.
4.

Rs 3 billion more for Vishesh Krishi and Gram Udyog Yojana (VKGUY).

The product coverage under VKGUY, a scheme to promote export of agricultural

and village industry products, was expanded to include additional products. For this
purpose, the revenue ceiling fixed for 2007-08 was raised by Rs 3 billion (from Rs
2 billion to Rs 5 billion).
Source: Govt Steps to Counter Rupee Appreciation, www.tradeindia.com, October
8, 2007.
In response to the demand for government intervention, Nath said, The rising rupee
is a matter of concern. The government is very much looking at it and it needs a new
response.53 Chidambaram also said that if the package offered to exporters did not
53

Steps Soon to Address Rupee Appreciation: Kamal Nath, www.andhracafe.com,

September 20, 2007.

265

International Business
address their problems, the government would think of coming up with a more
suitable package. However, he advised exporters to learn to hedge and reprice their
export contracts.
In August 2007, the RBI again began to intervene in the foreign exchange market by
purchasing dollars. The RBI also made it more difficult for Indian firms to borrow in
foreign currency. In an effort to check capital inflows, the RBI introduced new rules
concerning ECBs. Henceforth, companies wishing to go in for ECBs (to be used as
rupee expenditure) were required to take prior approval from the RBI. The RBI also
placed a limit of $ 20 million per company per financial year. While ECBs of up to $
20 million per company to be used as foreign currency expenditure for specified enduses was to come under the automatic route, ECBs of more than $ 20 million was to
require special RBI approval. In either case, the proceeds would have to be parked
abroad. The RBI also increased the annual limit on the amount of remittances from
India from $ 50,000 to $ 100,000.54 The RBI also increased the sterilization bond limit
by Rs 400 billion to Rs 1.5 trillion.55
In September 2007, the Finance Minister, while addressing a gathering in Washington
D.C. said that the rupee-dollar exchange rate was market-determined and that the RBI
would do the needful to control volatility. The rupees real and nominal effective
exchange levels are way beyond comfort levels at the moment, but that is something
we have to learn to live with. This is market-determined and it will be marketdetermined; but if there is volatility or any disorderly movement I suppose the central
bank will intervene using whatever instrument it has. The government does nothing on
that behalf, said Chidambaram. 56
In October, 2007, the RBI increased the limit for bond issuance under the market
stabilization scheme (MSS)57 from Rs 1.5 trillion to Rs 2 trillion for the fiscal year
2007-08.
In October 2007, the Directorate General of Foreign Trade (DGFT) carried out a
survey to study the actual impact of the rupee appreciation on industries. The
Directorate, which came under the Union Commerce Ministry, was to assess the
problems faced by the industries, including falling profitability, and job losses due to
the rupees appreciation and submit its report to the central government.
While Nath had said in September 2007 that there would be no change in the 2007-08
export target, in October 2007, Commerce Secretary Gopal K. Pillai said, It looks
unlikely that the $ 160 billion export target would be achieved for the current fiscal.
We would be quite pleased if it reached even $ 140 billion, estimating that the local
currency appreciates to 38 a dollar.58
Some international institutions estimated that the RBI would not allow the rupee to
appreciate further. Subir Gokarn, chief economist for Asia Pacific, Standard and
Poors59, said, We expect the Reserve Bank of India to resist appreciation beyond
current levels and the rupee will end the year at around 40.50 per dollar. 60
54

55
56

57

58
59

60

Ila Patnaik, Get Real about the Impossible Trinity, www.financialexpress.com, May 24,
2007.
Market Stabilisation Scheme: Revision of Ceiling, www.rbi.org.in, August 08, 2007.
Rapid Rupee Appreciation Is A Matter Of Serious Concern: FM, www.newindpress.com,
September 27, 2007.
The market stabilization scheme was introduced by the government and RBI in early 2004
to tackle strong capital inflows.
India Unlikely to Meet Export Target, www.tradeindia.com, October 10, 2007.
Standard and Poor is a leading credit ratings, investment research, risk evaluation, and
policy advisory company.
Rupee Hits 9-1/2 Yr High, Stocks Support, www.livemit.com, October 10, 2007.

266

The Indian Rupee-US Dollar Exchange Rate:

References and Suggested Readings:

1.

India: Apparel Exporters Reel under Severe Order Crunch, CIAe, www.fibre2fashion.
com, October 11, 2007.

2.

India Unlikely to Meet Export Target, www.tradeindia.com, October 10, 2007.

3.

Anoop Agrawal, Indian Rupee Rises as Stocks at Record Lure More Global Funds,
www.bloomberg.com, October 10, 2007.

4.

Rupee Hits 9-1/2 Yr High, Stocks Support, www.livemit.com, October 10, 2007.

5.

Rupee Gains on Buoyant Local Bourses, www.myiris.com, October 9, 2007.

6.

Shobha Kannan, Strong Re, Overpricing Likely to Hurt Inbound Tourism,

www.thehindubusinessline.com, October 9, 2007.

7.

Govt Steps to Counter Rupee Appreciation, www.tradeindia.com, October 8, 2007.

8.

Deepak Bansal, Appreciating INR: Industry Should Charge the Consumer Less,
www.merinews.com, October 7, 2007.

9.

Hina Mahgul Rind, Rupee Stands Firm against Dollar, www.thenews.com, October 7, 2007.

10.

Gayatri
Nayak,
Dollar
Inflows
Put
www.economictimes.indiatimes.com, October 6, 2007.

11.

RBI
Intervention
Pulls
Re
Down
www.economictimes.indiatimes.com, October 6, 2007.

12.

India
Wont
Miss
$60-B
Software
www.economictimes.indiatimes.com, October 6, 2007.

13.

Inflation Halts 5-Week Fall, Rises to 3.42%, www.economictimes.indiatimes.com,

October 6, 2007.

14.

Tackling U.S. Sub-prime Crisis in India, www.hindu.com, October 6, 2007.

15.

Rupee Gallops on Massive Capital Inflows, www.myiris.com, October 5, 2007.

16.

TB
Kapali,
Rupee
Appreciation
Upsets
www.thehindubusinessline. com, October 4, 2007.

17.

Firms Look at Ways to Control Effects of Re Appreciation, www.economictimes.

indiatimes.com, October 4, 2007.

18.

Panel Outlines Rupee Rise Solutions, www.economictimes.indiatimes.com, October 4, 2007.

19.

Managing the Rupee Rise on the Front Foot, www.economictimes.indiatimes.com,

October 4, 2007.

20.

US Dollar Ends Sharply Cheaper against Rupee, www.outlookindia.com, October 4,

2007.

21.

Priya Ranjan Dash, Rupee Appreciation weakens export, www.dnaindia.com, October 3,

2007.

22.

BPOs to Bear Brunt of Re Appreciation, www.economictimes.indiatimes.com, October 3,

2007.

23.

India: Rupee Appreciation Unable to Stem MSME Export, www.fibre2fashion.com,

October 2, 2007.

24.

India: Textile Industry Must Cope

www.yarnsandfibers.com, October 2, 2007.

25.

Exporters Seek Government Intervention on Rupee Rise, www.newspstindia.com,

October 1, 2007.

26.

D. Murali V.R. and Vinod Kumar, Rupee Appreciation Here to stay,

www.thehindubusinessline.com, October 1, 2007.

27.

Prabhakar Sinha, Stronger Rupee Saves You from Jitters of Global Gold Price Rise,
www.timesofindiaindiatimes.com, September 29, 2007.

with

Govt

Rupee

in

From

Bind,

9-Yr

High,

Export

Export

Appreciation

Target,

Arithmetic,

CITI,

267

International Business
28.

Anil Varma, Indias Rupee Heads for Biggest Monthly Advance Since April,
www.bloomberg.com, September 28, 2007.

29.

Rupee Appreciation a Temporary Phenomenon: Elangovan, www.economictimes.

indiatimes.com, September 28, 2007.

30.

Volume Growth Positive for IT But Re Rise to Curb Margins, www.economictimes.

indiatimes.com, September 28, 2007.

31.

Indias External Debt as at the End of June 2007, http://rbidocs.rbi.org.in, September 28,
2007.

32.

Rapid Rupee Appreciation is a Matter

www.newindpress.com, September 27, 2007.

of

Serious

Concern:

FM,

33.

Thats It, They Just Cant Agree! www.economictimes.indiatimes.com, September 27, 2007.

34.

Coffee, Tea Exporters Feeling Rupee Rise Heat, www.livemint.com, September 27,
2007.

35.

Deepshikha Monga & Gaurie Mishra, Rising Re Pulls Down Stocks of US-Listed
Indian IT, BPO Cos, www.economictimes.indiatimes.com, September 26, 2007.

36.

Re Rise Threatens Existence of Punjab Inds, www.economictimes.indiatimes.com,

September 23, 2007.

37.

Shubhra Tandon, Re Appreciation a Boon

www.thehindubusinessline.com, September 22, 2007.

38.

IT Faces Brunt of Rupee Appreciation, www.econmictimes.indiatimes.com,

September 21, 2007.

39.

Steps Soon to Address Rupee Appreciation: Kamal Nath, www.andhracafe.com,

September 20, 2007.

40.

Gary Singh, RBI has been Struggling to Work out a Way, www.nriinternet.com,
September 3, 2007.

41.

Sandeep V. Arora, Where the Indian Rupee is Heading to, www.nriinternet.com,

Setember 1, 2007.

42.

Rapid Rupee Appreciation a Challenge, Says Infosys CEO, www.hindu.com, August 30,
2007.

43.

Sanjeev Choudhary, Rise in Rupee, Sluggish Sales Take Toll on Apparel Exports to
US, www.economictimes.indiatimes.com, August 27, 2007.

44.

Kamran Sulaimani, IT Firms to Look within

www.economictimes.indiatimes.com, August 10, 2007.

45.

Deepshikha Sikarwar, Ratna Bhushan & Ashish Agarwal, Industry Must Show Import
Gains on Rising Re, www.economictimes.indiatimes.com, August 3, 2007.

46.

Rupee
Appreciation
Dents
Export
Growth
www.thehindubusinessline.com, August 2, 2007.

47.

Mahendra Kumar Singh, Strong Re May Shave off USD 13b Exports,
www.timesofindiaindiatimes.com, July 26, 2007.

48.

S. Venkitaramanan, Appreciating the Causes and Effects of Rupee Appreciation,

www.thehindubusinessline.com, July 23, 2007.

49.

Mitu
Jayashankar,
No
Model
Can
Sustain
www.economictimes.indiatimes. com, July 20, 2007.

50.

Ratna
Ganguli,
Exports
Sops
Elude
www.economictimes.indiatimes.com, July 17, 2007.

51.

K A Badarinath, Moderating the Appreciation in Re, www.economictimes.

indiatimes.com, July 16, 2007.

52.

Rajeev Malik, Indias Handling of Rupee Remains a Riddle, www.rediff.com, July 14, 2007.

53.

Rupee Appreciation to Result $15

www.indiantaxsolutions.com, July 7, 2007.

268

bn

Fall

for

in

Outbound

to

Tackle

Re

Sharply

9%

in

Re

Herbal

Exports

Tourism,

Rise,

June,

Rise,
Products,

in

2007-08,

The Indian Rupee-US Dollar Exchange Rate:

54.

India Finance: Rupee Dilemma, www.viewswire.com, June 26, 2007.

55.

Alok
Ray,
Rising
Rupee:
The
www.thehindubusinessline.com, June 15, 2007.

56.

Kamal Nath Announces Package to Counter Impact of Rising Rupee on ExportsAssures Exporters of All to Reach Export Target of US$ 160 Billion,
www.commerce.nic.in,
June 13, 2007.

57.

John
Rebeiro,
Indian
Outsourcers
www.networkworld.com, June 7, 2007.

58.

Rupee Appreciation Affecting Textile Exports, www.epaper.thehindu.com, June 6,

2007.

59.

Rupee Appreciation, MAT May Harm BPO Industry, www.economictimes.

indiatimes.com, June 6, 2007.

60.

Ila Patnaik, Get Real about the Impossible Trinity, www.financialexpress.com, May 24, 2007.

61.

D. Sambandhan and M. Ramachandran, Making Sense of Rupee Appreciation,

www.thehindubusinessline.com, May 19, 2007.

62.

Indian Rupee: What lies ahead? www.equitymaster.com, May 15, 2007.

63.

Swaminathan S Anklesaria Aiyar, Dont Worry, Rupee isnt Really Rising,

www.economictimes.indiatimes.com, May 9, 2007.

64.

Muzaffar A. Chishti, The Phenomenal Rise in Remittances to India: A Closer Look,

www.migrationpolicy.org, May 2007.

65.

Radhika Bhalla & Rajeev Jayaswal, Finmin Backs RBI in Rupee Tone-Up,
www.economictimes.indiatimes.com, April 24, 2007.

66.

Mini Joseph Tejaswi, Rupee Appreciation to Hit Software Cos, www.economictimes.

indiatimes.com, March 29, 2007

67.

Gargi
Shah,
Rupees
Rise
against
www.thehindubusinessline.com, January 30, 2007.

68.

A Record Appreciation of the Indian Rupee in the Forex Market by 3.8 Percent
Dampening IT Outsourcing Margins, www.indiadaily.com, January 11, 2007.

69.

Report on Foreign Exchange Reserves, www.rbi.org.in, July 14, 2006.

70.

T.C.A. Ramanujam, Currency Crossfires, www.thehindubusinessline.com, June 27,

2003.

71.

Harish Damodaran, Forex Reserves: From Penury to Plenty, www.blonnet.com,

November 29, 2002.

72.

Devika Johra and Mark Miller, Devaluation of the Rupee: Tale of Two Years, 1966
and 1991, www.ccsindia.org.

73.

www.fieo.org.

74.

www.ciionline.org.

75.

www.assocham.org.

76.

www.investopedia.com.

77.

http://en.wikipedia.org.

78.

www.rbi.org.n.

79.

www.economagic.com.

80.

www.banknetindia.com.

Causes

Hit

by

Dollar

and

Consequences,

Rupee

Appreciation,

Tempers

Gold,

269