if you are an NRI, you must have noticed the drastic appreciation of the rupee in the recent months. While it does hurt all the NRIs transferring money to india, I think it may actually be good for the indian economony in the long run.
Let's go through some basics. Rupee appreciation implies that imports will be cheaper and exporters will get less number of rupees for their goods (unless exporters have rupee-based contracts, which is a rare case). so, the exporters' profit margin will diminish. If the rupee appreciates enough, exporters will have two options to remain in business. They can either raise the price of their products, which will likely make them priced out of competition, or squeeze in more efficiency to keep their profit margin. In some situations, exporters won't be able to raise the price at all and so the only way for them to survive is to increase their efficiency.
It is expected that the recent appreciation in rupee will lead to the loss of about 200,000 jobs in india. I still believe that the appreciation is good as it forces the exporting companies to become more efficient. e.g. in the IT industry, companies will be forced to move up the value chain. This is really good because, if we don't move up the value chain, it won't be long before countires like china, russia and philippines, etc. catch up with india in the outsourcing game.
Besides, rupee value should be determined by market forces alone, and keeping it artificially low forever won't do much good. I think the RBI has done a great job of controlling short term volatility yet letting the rupee value move according to the market forces. The key is to let the rupee raise in a slow and consistent fashion.
