Fighting Currency Devaluation
Ankit007
Its been a long long time since i wrote anything(More than a year i guess!!)in my newspaper.Well this is the first time i am actually writing something meaning full and i have finally decided to put my newspaper to some use.
There is a frequent fluctuation in the currency rates not only in India but the entire eWorld but i will keep my focus to India at the moment.
Well, to cut a long story short i will skip all the history and geography of the problem and straight away come to the solution.
SOLUTION
-The government should raise the import taxes.
This will benefit India in 2 ways.One-This would prevent Indians from buying goods produce by foreign manufactures.If people buy from foreign companies,they get Indian currency into their hands and they can fluctuate the value of INR.After observing the monetary market for a couple of days i concluded that most of the devaluation has been caused by non-Indian citizens.Two-This will help Indian Economy develop.At the moment Indian companies are facing competition from foreign companies.At the moment there is no need to import manufactured goods from the foreign market.
-Indian company owners should export the surplus goods into foreign markets
This would get Gold inflow into the Indian Economy.Target small countries where there is deficiency of the product you are manufacturing.
These are just suggestions are these suggestions are open for debate.Please feel free to express your opinion.
Comments
agree concentrate more on export then import
We need Indian companies to grow stronger and Govt must use some of its reserves for this purpose. MM can be regulated by govt. and active role must be played by finance ministry.
Agree in principle but your 2 points are contradictory. If every govt adopts your 1st suggestion and increases the import taxes, then no country can export their goods.. can they??
So the correct way is to ensure our exports and imports are balanced well. Which means increase our exports to balance out the imports. Not just reduce imports, because that in turn will make cost of living higher in eINdia.
Nandu, the govt is fully participating in the MM by ensuring that the liquidity is in control. Please readup on the Indian government bank's Financial update released yesterday for details.
@Graf Sprat
I am not taking the global scenario into consideration please read the line-"i will keep my focus to India at the moment."
I am not suggesting this to every country, i am just talking about what we should do in India.I am not saying that we should completely cut off the imports.But imports for most of the products are useless but we need imports for certain products like moving tickets etc.
@Ankit007
But if some countries start the protectionism like you are suggesting, the other counties will reciprocate and correspondingly raise their import taxes and it will create the ripple effect which you are anyway seeing in most
Countries Like USA however are now seeing the folly of this and are reverting their import taxes back to 1% or so.
btw, moving tickets are getting discontinued this weekend...
We actually do not need to import goods from other countries until there is a shortage.So for the time being we need high import taxes.Moreover, we should not deviate from the chief concern that is currency devaluation.We are a small country right now and we cannot afford to have our currency in the foreign market.We need to develop our economy and it would hamper our development if our companies face competition from foreign companies.
Ankit, what you are suggesting is very similar to a protectionist regime like RL india used to be before 1990's. Its a myth that such regimes result in prospering of local industries. Lack of competition only results in stagnation and lower efficiency. You can fight currency devaluation (which is your chief concern, though i dont know why looking at the currency rates) either by decreasing imports (and reducing consumption and trade) or increasing exports (resulting in higher gdp)
btw, can someone elaborate on why low currency rates are are so bad
V
Nice one Abhi...
If someone really wants to read the RL reasons of why high import taxes are bad for economy, you can do that here
http://tutor2u.net/economics/revision-notes/a2-macro-protectionism.html