Aim long term for a strong currency

Context:  A case for maintaining a strong currency as opposed to a weak currency supporting exports.

Problems with strong currency:

• Exports will become expensive: due to reduced margins for sectors relying on wage-rate arbitrage such as Information Technology Enabled Services and labour-intensive manufacturing

Need for a strong currency:

• For a more productive economy: Indian rupee depreciated since 1980 reflective of the relative strength of the US as a more productive economy, with lower inflation.
• Strong currencies reflect strong economies: E.g. US dollar, euro, British pound, Japanese yen, Swiss franc, Chinese yuan, and Singapore dollar.
• For cheaper imports: This is important for India for containing expenditure for an oil and other energy imports, defence procurement, gold and electronic.
• For more disposable income with the consumers: Disposable income will increase due to reduced costs and enterprises having higher surpluses from better profit margins

Ways to improve the strength of the currency:

• Increasing the rate of growth: Focus on productivity, deal with emerging market realities of agricultural shocks and wage-push inflation, a radical improvement in infrastructure and in organizing human resources
• Improve Services: Higher standards and skills for manufacturing, processes, and emissions can be achieved through good logistics, power, communications, water and sanitation
• Attract transnationals to invest in India:
• Improving services and standards will attract transnationals to India by consistent policymaking and removing hurdles (taxation and contracts issues) encountered by international investors.
• By nurturing the global investors. E.g. Like in the way that Suzuki was to automobile manufacturing, with nodal government coordination.
• Incentivize manufacturing: Systemic initiatives like anti-dumping duties and targeted manufacturing incentives shall be taken to improve manufacturing.
• Increasing exports: By lowering import tariffs and increasing export capabilities by adapting policies in other emerging economies such as Bangladesh and Vietnam.
• Support start-ups: even after the venture rounds are completed.

Conclusion: We should take necessary steps as mentioned above over time, to contribute to a strong economy and more stable currency.