Weak Rupee or Strong Rupee

Unlike China, India has allowed its currency to appreciate by almost 13 % since January 2007. People from US might not have heard a lot about it (except those who outsource to India) because the trade between India and US is a pathetic 22 billion $ compared to 288 billion $ with china. But still Rupee appreciation is a very big story in India.
So what is going on? The Rupee exchange rate is neither completely fixed not floating but is ‘managed’ by RBI through selling or buying other currencies. Till April RBI was buying a lot of dollars to keep the currency fixed at 44 Rs. to one $ but with investor sentiment so hot on India that money pouring from abroad is already 12 billion $ till November as compared to 8 billion $ last year that the RBI found itself spending more and more on buying $ to keep the currency floating. But when inflation shot to 6% in April the govt. stopped buying $ and let the currency appreciate. The result – Rupee is 39.5 to a dollar.The stronger Rupee hurts exporter because it makes their products more expensive to overseas. The software companies are feeling the pinch and have reduced their profit forecast for the upcoming years (the tech companies which were once the favorites of the stock markets have lost its status nowadays). Indian news reports have also warned that the total Indian exports this year will be around 125 billion $ compared to the 160 billion $ it gave at the starting of the year and up to 275000 jobs might be lost for the same reason.
The stronger Rupee has reduced inflation but at what cost? The exports are dying and the imports are ballooning. Perhaps we should be more like china which keeps its currency pegged while the whole world cries. Textile exporters who operate on silk thin margin are already going into losses.
What might be the advantages of a stronger Rupee? Well a stronger Rupee will force the Indian companies to be more competitive and efficient especially since the Chinese currency will appreciate over the next couple of years. Also it will differentiate us from China and we will be seen as a fair global player. Overseas flights and travels will become cheaper and so will the imports of goods (some electronic goods such as television have already reduced their price by 10%). It will also help Indian firms to snap up overseas firms.
But one significant change that this Rupee appreciation has brought can be seen in the entrance fees at monuments like Taj Mahal, which traditionally offered a rupee rate to the locals and a higher dollar rate to the for foreigners. Now Govt. has stopped accepting dollars at national monuments because of their value in Rupee terms have dropped so much. Foreign Tourists will now have to pay the same way as Indian do : in Rupees.