What the strengthening Indian Rupee means

As recently as about 3 years ago, US $ 1 was worth almost INR 50 (ok, a few paise less, if you want to be puritanical about it!). But today, the exchange rate is closer to US$1= INR 40 (maybe INR 39 is closer to the truth). The very premise of the Indian IT services and BPO industries is being questioned. Exporters are upset- and the impact is there for all to see whether it is garments and textiles or tea or even silk and handicrafts.

But is it all just gloom and doom? Foreign travel has become cheaper (in Rupee terms)- so more people are holidaying overseas and getting exposed to the global environment; each Rupee goes farther in terms of paying for our imports. Hiring foreign talent will be less of a burden (whether we are talking pilots or CEOs)- especially when a large chunk of the company’s revenues are denominated in INR, giving it a natural hedge (of course, when the contract is renegotiated, the expats may demand to be paid in GBP or some fancy basket of currencies!).
In the long run, a strong Rupee can only be good for the nation as a whole. Yes, certain industries will be adversely impacted- and they will need to focus on enhancing productivity, providing higher-value services that will command higher price points, and simultaneously, expand to locations that are still cost competitive. For instance, if India’s outsoucing industry is benefiting from the country’s colonial past in that English is widely spoken and is often the medium of instruction, then why should he industry not leverage the same historical English connection that African countries like Kenya and Botswana also possess? Or for that matter, tap into Francophone Algeria to service the outsourcing needs of French speaking companies/markets? If companies were to do this, I believe the true benefits of globalization would percolate far quicker across the world.