Rupee appreciating very predictable as our balance of trade decreases and influx of more dollars in our market due to the recession in US...A very debatable fact that whether appreciation of rupee is good for our economy or not ....good for our imports but bad for our exports especially our IT sector .Why are the exports based sector affected , this is due to the sectors cost in rupees and revenue is in dollars , any decrease in the value of dollars reduces our bottomline .
Now how to counter this change in monetary value and sustain profitability.......
1. Try to get ready with the change , hedge properly that is to decide the exchange rates in advance so that devaluation doesnt affect the company that much.
2.Try to trade in rupees rather than in dollars.
3.Try to shift the business to more destinations rather than trade in one.
4. Be product centric rather then be purely service centric.
5.Try to give a part of salary to employees in dollars as employee salary consists the majority of the cost in services sector.
6. Increase duration of working hours to increase productivity.
7.Tap the huge unserved domestic market.
8. The BFSI sector needs to forward hedge their contracts.
9.Shift businesses to SEZ's to avail the facilities of subsidised tariffs.
10.Diversify into import oriented businesses to sustain from the reduction in profits .
Services account for 55% of our GDP , Goverment has to come up with monetary measures and give more liquidity of the rupee in the Indian market so that is no further appreciation of the rupee, in the meantime companies have to take up smart hedging techniques like split , vanilla to counter the loss suffered due to the appreciation of rupee against dollar.
1 comment:
interesting read....the one solution that does strike is that even though the indian companies do engage a lot with the US,being the prime driver for their revenues,and the dabbling in the European markets also raking in the mullah..its the domestic markets thats continuing to elude the service industry..while manufacturing industries are soaring on the account of an ever increasing demand for steel and cement from within..its the failure of the IT industry to make inroads into the huge domestic market thats surprising me no ends..and whether it is some hesitancy on the part of the indian MNCs to engage in business due to fear of red tapism or the more lucrative foreign shores..this definitely will be a loss in the long run..our IT industry has always had the first mover advantage in the services segment what with top notch compaies, late entrants into the services, still facing the heat and playing catch up in this segment..i hope they realise this fact and have a more proactive approach before their growth becomes horizontal with the ruppe still growing stronger,the looming crisis in the US markets and the wrong noises being made about outsourcing which will definitely grow louder as elections close in.
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