1 USD equals 1 INR: As it is always racing in currency exchange market for dollar vs rupees every Indian wish that why can’t be one rupee is equal to one dollar? this is the question quite similar to why can’t we just print money and pay all the debt?? Yeah, there are some pros and cons to the situation but let’s see what happens if overnight or short period of time dollar equals to rupees first of all. the high value of the currency does not mean the economy of the country it’s stronger, if that was the case then Bangladesh would have a stronger economy then Japan because 1 BDT is equal to 1.4 Yen.
Pros of 1 USD equals 1 INR:
Now the pros of the situation buying goods will be cheaper for Indians in the international market because this will make imports cheaper which is quite good for the developing country buying luxurious goods will be very easy for Indians.
Simple Example: iPhone 6 will cost only 650/- Indian rupees, which quite cheaper than the current market rates, goods import are cheaper. than petrol price will be cheaper resulting in reducing the transportation cost of the goods around the country this looks like a quite good scenario, but this will not last long for the situation. because another side of the story is completely different.
Cons of 1 USD equals 1 INR:
Now, cons of the story, the exports will be quite expensive because Indian products will be expensive when compared to other competing nations, as the Indian export is booming quite a lot since recent years. if it’s expensive? why any country would buy things from us if they can buy it from the other competitors with lower cost. No foreign investment the number one reason for the foreign investment in India is the cheaper labour cost. Foreign companies will not be investing in India if they can invest in another country for a cheaper price. Investment in IT sector and service sector which contributes to a huge amount of Indian economy will be gone.
Now as the rupee is equal to dollar why any company would pay to an employee’s 75000/- per month if they can hire someone outside who will do the same work for 3000 USD or rupees. Also, people wouldn`t pay 4000/- rupees per month to make instead they buy a nice 1000 USD Vacuum Cleaner.
So eventually people will lose jobs which will increase unemployment, plus the investment is not coming to our country resulting in a complete economic will slow down. The outsourcing of jobs in India will be stopped. Also, the company which are present in India will start to move out, as it will be not profitable for them. Similar situation happened in 2008 when dollar was quite strong around 40/- the imports were good but the BPO sector and the IT sector suffered a lot, the situation of 1 rupee will be equal to 1 dollar is just not affordable for growing or developing country, now someone will say what if we don’t need foreign investment we use all the swadeshi stuff, well that will not work either we have done that till 1990 and the economic growth happens when let go that idea after 1990.
If we boycott foreign products and other will also boycott our products which will reduce exports, because we reduce imports this is not beneficial it is called protectionism which is completely opposed to free trade also fewer exports mean less foreign results for imports, Japan also suffered a huge economic loss when their currency was overvalued in 1986. Chaina has the fixed rate system in which government decides the value of currency and they devalue their currency against the dollar all the time just to capitalize on the export market at the beginning of 2016 chain has done the same our finance minister and RBI governor is not worried about the falling rupee but they are worried about the fluctuations in the market the stabilization of Indian rupee is the important thing whether it might ne on 50, 60 or 70 today if rupee is 60 ad tomorrow it is 70 its too much fluctuation in short time and not good for economy.
As we have adopted floating rate system since 1975 the finance minister and the RBI Governor and government can`t decide the value of currency it’s the market supply and the demand of rupee decides the value but the finance minister and RBI governor to have control over the policies and maintaining the foreign reserves of the country through this to try to maintain the value of rupee cost and by controlling the inflation rate so that the currency does not get completely depreciated as a Indian we do want our currency to be high valued but at what cost the cost is too much and the main reason is as I mentioned earlier the cost of the currency is not the scale which determines the economy of the country it is just a different way to measure value. A mile is 1.6 Kilometer but if you run 16 Kilometer is 10 miles the distance is the same eventually it will happen with the growing economic activities manufacturing and production at much more scale but no sooner than 4 to 5 decades or maybe more.