Is the Strong rupee good or bad for India ?
Just a few days back, I’d written about how the strong rupee is hurting the Indian software services companies and the Indian BPO industry.
Yesterday,Knowledge@Wharton published an excellent story on the same topic - rising Rupee against the US Dollar.
Here’s one of the most interesting highlight of the story:
As per Wharton finance professor Jeremy Siegel, this has been the strongest appreciation of the Rupee in over 30 years.
You can read the rest of the article here.
July 30th, 2007 at 7:00 am
Hello Pranav,
This is my first visit to Startup Dunia.
My name is G Vishwanath.
I am a self empoyed structural engineer owning and managing a small Knowledge Process Outsourcing unit in Bangalore for the past three years.
I am the same person who occasionally posts comments in Kamla Bhatt’s blog and who you were kind enough to notice and applaud recently.
While I am not a blogger myself, I do enjoy reading the blogs of others as and when I get the time.
I am planning to add your name to the regular bloggers on my radar.
Depending on time availability and also depending on my competence to do so, I may respond with a comment. Unlike Kamla’s blog, yours is on a more specialized subject and I may not be able to comment as frequently as I would like to.
I will try to keep my comments short, but sometimes the subject is such that I am unable to be brief. I hope you will tolerate them if they are occasionally longer than desirable.
Your post on the rising rupee is timely and very relevant particularly to me.
I am one of those being badly hurt by the rising Rupee.
When I entered this business, it was Rs 48 and now the Dollar trades at Rs 40 in a period of three years and the prospects of a further rise of the rupee to Rs 38 or even Rs 36 as some people are predicting is truly frightening for me.
Isn’t it ironic?
As a patriotic Indian, I should actually be happy at this development.
The Iphone or the latest hand held computer that I have been wanting to buy, the additional software licenses that I want, the air ticket to USA to visit my daughter and son-in-law are all getting cheaper. That is good news. But these are one time purchases.
The rising salaries and increasing office running expenditure are recurring outflows , and the fact that my income is wholly from remittances from USA, has hurt me badly.
I don’t know how much more of a rise in the rupee I can sustain.
We in this businees need not expect any tongue clicking sympathy from fellow Indians.
We (in the BPP/KPO/Software business) are an envied lot. The average man in the street considers us responsible for all the ills he has to suffer. We, in their eyes, are responsible for the higher rents, soaring real estate prices, higher salaries to everyone including the humble maidservant. I rather suspect they must be gloating over our predicament.
Cutting back on salaries is a difficult decision. My competitiors are also affected and we are all waiting to see who blinks first. The “first blinker” is also likely to be the first to lose his productive staff to the competition. Poaching is rampant in our field.
Taking up Indian assignments is no solution. The compensation we get for doing the same work for Indian customers is a pittance compared to what overseas customers pay us. The salary levels of the staff have been fixed based on revenues in dollars and exchange rates prevailing during the past couple of years.
Working longer hours is also not a solution. The nature of the work we do is such that mental fatigue sets in at the end of 8 hours and additional hours do not result in additional productivity. Rather it may cause mistakes and they can be costly. Besides, in our line of work, the staff cheerfully work additional hours without having to be told whenever there is a race against deadlines.
Roping in staff on the bench is also not an option for me.
We are too small to afford benches and keep any one sitting idle on the bench.
Working on Saturdays is not an option. In my case,we already work on alternate saturdays. Denying the staff a break on the the other two Saturdays also may result in absenteeism during the week.
Moreover, overseas clients are not concerned with our hours of work. They are only interested in the price we bid and our completion schedule. This rise in the rupee automatically pushes up our price by about 20 percent and that is disastrous in a market where we are competing with China and Phillipines. The Chinese can be predatory in their pricing. We now have an edge in both price and the fact that comfort levels of US customers in dealing with us in India is better due to our familiarity with the English language. The rising rupee will deprive us of one of the advantages. China is taking to the learning English in a big way. The next generation of Chinese will be as good as we are in the English language and this advantage will also be lost.
Not recruiting any more seniors and taking only junior staff so that I cut back on salary payments is perhaps the only option open to me now. But in my line of work, I need a few senior hands too. The work is such that some critical parts of the work can be done only by the seniors and any number of junior hands will not compensate for the absence of a senior hand.
I am keeping my fingers crossed.
Mine is a small set up. The fall if any will be hardly noticed.
I wonder how the bigger fish are coping.
The bigger they are, the harder they fall. The mild “thud” in my case will be a loud Crash when the big names bite the dust.
I will hope and pray for better times.
What else can I do?
Keep blogging. I will comment as often as I am able to.
Regards
G Vishwanath
JP Nagar, Bangalore
July 31st, 2007 at 8:58 pm
Unsure of how you’d like to called, I’m sticking to G Vishwanath.
Thanks for stopping by and sharing your experience. After all, every piece of information gleaned broadens your perspective.
I loved reading your comment - especially more because you’re first hand experiencing the pinch.
I think what is really brutal to BPO-KPO companies especially is the added factor of the stronger rupee..The wages have been going up in double digits for the past several years now. Now, alongwith the double digit wage increase, you also have the reduced margins — a double whammy..
August 7th, 2007 at 10:33 am
It is a loss for me as well for other exporters. Import goes benefit while many export and IT companies will continue to suffer