Falling Dollar: Is It The End Of Outsourcing Festival? The
US Dollar is travelling through rough weather. Acres of paper are being wasted in reporting the effects of the ending reign of US Dollar. Let us examine its effects on Indian economy. During last five years, India has done commendable progress in economic field. If we want to give credit to a single sector for this, the software segment has first claim. The software boys and girls working with deadlines wrote, or keyed, the initial chapter of our recent economic success. The liberalised world trade was bound to open the doors for our exports, too. It did. The
exports of commodities have picked up the pace well ahead of other developing nations. Catching the fire of the western nation’s desire to have cheaper goods, India’s exports of manufactured
goods have risen to their new heights. Multi-national companies of the developed countries have taken route of outsourcing their jobs. They found it profitable to get work done in the low-cost countries. The countries like India and China endowed them with benefits of cheaper labour, liberal tax structure, and exploitable presence of their virgin minefields. But the falling Dollar and rising
Rupee has checked the fast running train of India’s export trade. It has become a major issue of debate that how the southward moving graph of the Dollar would and could affect our trade.
US$, HITTING OUR EXPORTS India’s exports during the month of June 2007 were valued at US $ 11867.11 million, which was 14.05 % higher than the level of US $ 10405.07 million during June 2006. In rupee terms, exports touched Rs.48386.49 crore. As per the Central Startistical Organization, Central Statistical Organization the industrial production registered 11% growth in the first quarter of current financial year. Most of the goods producing units, contributing to the pool of exportable merchandise, are either small or medium sized factories. These small and medium
units contribute 60% of the total goods exported. Being run with lesser capital and higher overheads, they cannot bear the losses due to the cuts in sale proceeds due to fall in the Dollar. Many of these units are either fearfully running on the edge of a sword, or have been closed down helplessly. Can these situations be changed? Will the Indian industries be able to sustain present onslaught? There are no black and white or straight and sure answers to these queries. At best we can place forward certain ‘ifs’ and ‘buts’, which on their implementation can ease the difficulties.
LET THEM FACE THE HEAT AND RAIN Our industries in general and the export sector in particular have lived under government’s protective umbrella. It has made them the lame ducks. They have become spineless to run with the winds of liberalised world. They have enjoyed one or another protection, overtly or covertly. To make our export units competitive, the crowd of export promotion councils that mostly cater the needs of ‘apanewalas’ should be wound up at the first instance. Such unhealthy facilitatation has enabled certain sheep to wear lion’s skin; and these are the groups that are now shouting for the higher dose of governmental help. Apart from that, RBI has tried unsuccessfully to maintain the Indian Rupee’s parity with US$, by purchasing Dollar from market. Instead of helping the forex rate, it has only delayed the obvious outcome: the appreciation of India Rupee against US Dollar. Had the India’s apex bank not tried to manipulate the Dollar prices, by now our exporters would have accepted the reality. It would be advisable to let the currency rates face the market forces. However the cessation of the useless help packages should not affect the primary incentives for producing more and exporting at competitive prices. We cannot put these units at harm, as these production units provide employment to millions of skilled and unskilled labourers. After an independent survey, the needy groups of the industries should be sorted out and they should be assisted through monetary means.
FINDING NEWER FIELDS In addition to the traditional exports, the country like ours needs to promote non-traditional ways to boost the international trade. Today we invite FDIs in selected sectors only. The large section of infrastructure and the services like banking and insurance are still disabled to have much share of the FDIs. If we can divert the foreign funds to improve our road and port facilities, we can reap cumulative benefits out or such increased investments. These sectors require longer retention period. So the touch-and-go-type investments would stop and the really interested parties would come into our economy. It would result in stability of the currency rates, too, as we would be able to assess the outflow of the forex. The India story is not over yet. It is still hot in the European and American markets. After the renewed friendship with USA, host of new investors tend to have India on their list. Obviously the Indian investors are also shopping for big opportunities abroad.
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