THE RUPEE is only 39.90 leaps behind the dollar! A great achievement indeed! The rupee has now appreciated to a new high. With this new appreciation of the rupee we can purchase a dollar for less than Rs. 40 from now on.

Decades back, the Indian rupee was regarded as being much inferior to the dollar.  People strove hard those days to stash away the hard-earned dollars for their next foreign visit or for their children abroad. The rupee, which ruled at an all-time low of 49.06 against the dollar, was expected to further depreciate. That is the reason why people regarded stashing away dollars as a smart idea. It is not the dollar’s value which is decreasing but the strengthening of the Indian rupee that has brought about the present state of affairs. 

Anyway, after a long time some great news is coming our way which will be particularly welcomed by those who want to travel abroad. Now their rupee will buy more goods and services - they will be able to visit more places and do more shopping. For students who want to study abroad, it is a great boon. They will have to pay fewer Indian rupees to buy dollars. And studying in the best of universities would be cheaper.

On the other hand, with the shrinking of the dollar, the exporters are getting worried. Even the NRIs and families who depend on the money sent by their kith and kin abroad are not happy with the appreciating rupee, because now a dollar translates into fewer rupees. However, it would be very advantageous if the rupee further rises. It would be very lucrative to those foreign institutions and companies who have invested in India, since, along with the increasing dollar re-turns, they can hope for steady rupee returns. 

Oil companies and gold importers who were facing tough competition in the global market can breathe easy. All their imports will cost less in terms dollars.  Internationally, a few days back, the oil companies were faced with soaring crude prices-- a barrel costing as high as $80--$90. On the flip side they were unable to increase the oil price in the domestic market, because the government would not support such increase. However, given the stability of domestic prices and increase in the value of rupee, gold importers are likely to benefit more, especially at a time when the global price of this precious metal is constantly in-creasing.

The other side of the coin implies that software companies, textiles, leather product and apparel manufacturers would be the major losers. The dollars earned by software exporters (already operating on thin margins) will translate into fewer rupees. In case of textiles and leather products too, the exporters cannot in-crease their dollar price in the global market because of the fierce competition.

The rupee did not surge all of a sudden. The increasing software exports, more and more FII’s investing in the Indian market led to the inflow of more dollars into the Indian market, thereby making the rupee scarce compared to the dollar. Keeping in view the threat of inflation the Reserve bank of India has allowed appreciation of the rupee, which resulted in last Thursday’s (20 September 2007) historic news--rupee is now just 39.90 leaps behind the dollar!