Have You Guys Ever Thought What Would Really Happen If 1 Indian rupee becomes equal to the value of 1 American Dollar?
Yeah, why not, then we would be able to buy iPhones and iPads at just 300Rs per piece and cold drinks will look just so cheap.
Well yeah, that’s so true but if Apple and coke really would be making such a low-profit on their products then why would they be selling them in India at first place.
It really looks like that every Indian will become rich this way and US tourism will also become cheaper but then who will be making the profit? For example, If a doctor’s monthly income is Rs 80,000 in India and $3000 in the USA and suddenly 1 INR becomes equal to 1 USD, these are the consequences:
1. Any International employing company would be paying $80,000 to that same doctor whom it was supposed to pay just $3000, which means a huge loss fo the company.
2. Any Multi-National Company (MNC) would never like to hire any Indian at higher price for the same work which an American would be doing at very less price.
3. Decrease of Indian employment in International sector, which means the economic loss for the country.
4. As no company would like to open its franchise in India, it will also lead to the infrastructural decrease.
5. Decrease in the heritage of the country.
So yeah, even if everything becomes cheap for the people in the country and even a beggar also feels like a rich man, everything will go down again as then nobody will be making the profit and India will go poorer in the International levels.
These were the stats about private sect or companies (non-governmental) as then they will be making no profit but what about the government sector?
It is really very important that even if a private sector company’s income could be only through national transaction but government’s income has to definitely rely on country’s International status and here is some knowledge about the impact on government’s income if 1INR=1USD:
Devaluation is the process in which a country lowers the value of its currency in comparison to the currency of some other country. This process mainly helps the nation to extract huge profits in the export of goods to that country.
For an example, if the country exports a $1000 product to the USA, then it gets around 60,000 rupees in return which means a very good profit. Now if the government decreases the price of rupee and makes 1USD=70INR then it would be getting 70,000 rupees for the export of same product which means more profit. SO NOW IMAGINE!!! If the government raises the value of a rupee and makes 1INR=1USD, then the country would be getting just 1000Rs for the export of that same product for which it could also have got 70,000Rs, which again means no profit.
Therefore, in relative terms, making 1INR=1USD will make items cheaper inside the country and cheaper foreign tourism, but it will relatively lead to more inflation as then if no company would be making profit on its products then it will automatically raise its price. Government salaries will also go low due to the loss in export of products and private salaries will go low due to the less demand of Indian workers.