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  Canada Immigration Forum > General > Our Native Country! > Indian currency exchange rate - why going down.
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Indian currency exchange rate - why going down.




Why is it going this bad... if the economy is picking it up, I was expecting more and more INR investment to firm up the currency.

Despite all NRI / NRE investment, the exchange value still goes down the drain.. Going at this rate, in 5 years I could expect.

1. Petrol cost Rs. 160 / Liter.
2. Two bed Metro house rent at Rs. 45,000.
3. Sky rocketing food price.
4. Unaffordable labor.
5. 75-80% housing units be financed.
6. More than all Healthcare / Education would be a great rip off.....

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The weak died on the way,
Only the strong arrived.
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JRF

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Location: GTA, Ontario

Post ID: 189194 09-11-11 10:13:29
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bhootnath
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A very good question that had been bothering me for quite sometime. Hopefully pundits would send responses. That also makes one wonder is it really worth investing in, lets say housing in India. Every time I hear that prices of housing is doubled/trippled in 5 years time but hast it really? Considering inflation and devalued rupee, it may not have gone up that high in terms of CAD. Oh well, I guess one needs to diversify. (Hope not hijacking the thread).

 
Post ID: 189196 09-11-11 10:50:01
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ashedfc
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True, Its not an unrealistic expectation... infact some of them may go even more than you expect.
Yesterday, India announced its biggest ever trade deficit since 1994, which means, India exported a lot less than it imported. This deficit is bad for the currency (Rs.). And, at the same time, there are problems in the Eurozone (specially now Govt of Italy is having difficulty raising money from the Bond market, capital is fleeing Euro & rushing into USD & Gold). This has caused the USD to rally in comparison (US in itself has its own problems, but as of now its like the least worst currency USD is getting a life; this has affected the Rs downwards over 50 on USD)..

Over the future India's currency is practically tied to the dollar, & the Dollar is tied to the US financial mess......... what it means is USD will go down due to structural problems & Rs will go down with the USD because they are tied to each other.. SO..... You can expect all currencies to loose value in tandem to each other.

This causes monetary inflation (means High prices due to decrease in the value of currency) - an increase in prices is the result of inflation. India is also witnessing demand based inflation (more demand than existing supply, causing prices to go up)..
So, In India both inflationary factors are playing its role... this is precisely why your 5yrs assessment is correct (maybe the actual reality might overshoot.... I mean a Two Bedroom Metro House in a posh area rent today ranges around Rs45000, in 5yrs you can expect it to be much more maybe Rs 1lakh per month)..

After couple of years most of us from Canada going to India maybe be treated like a broke guy with no money, as our money wouldn't even buy anything reasonable..... Some have already missed the boat..


 
Post ID: 189197 09-11-11 10:52:00
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web2000
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I have some money(Say $10000) sitting in my savings account. The only option I see to get guaranteed return is to put it in NRI fixed deposits which will yield at least 9% growth and be taxed. I do not see any better option in Canada to invest that small amount of money.
Can anybody provide some suggestions?


 
Post ID: 189198 09-11-11 11:05:40
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JRF
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Quote:
Originally posted by ashedfc

this is precisely why your 5yrs assessment is correct (maybe the actual reality might overshoot.... I mean a Two Bedroom Metro House in a posh area rent today ranges around Rs45000, in 5yrs you can expect it to be much more maybe Rs 1lakh per month)..



I didn't mean an upscale apartment but an average apartment with facilities enough to entertain a small family that includes some play area, pool and family gathering area etc., upscale apartments can go to any level but in general they aren't included for economical forecasting.


Quote:

After couple of years most of us from Canada going to India maybe be treated like a broke guy with no money, as our money wouldn't even buy anything reasonable..... Some have already missed the boat..



To beat that, some invest in Indian real estate and some are holding on to what they have there.

We got to accept that a loss in the game of investment is inevitable. Shifting strategies continuously would affect more than staying put. I wouldn't think it would ever make any sense to any one to think about investment when there are open loans including Mortgage, car payments and enough to sustain at least six months...

-----------------------------------------------------------------
The cowards never started,
The weak died on the way,
Only the strong arrived.
http://www.youtube.com/watch?v=_yK1i9cLAMM

 
Post ID: 189199 09-11-11 11:33:35
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rajcanadaMember of Administrators
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Quote:
Originally posted by web2000

I have some money(Say $10000) sitting in my savings account. The only option I see to get guaranteed return is to put it in NRI fixed deposits which will yield at least 9% growth and be taxed. I do not see any better option in Canada to invest that small amount of money.
Can anybody provide some suggestions?



You have to factor in exchange rate losses for conversion of CAD to INR, from INR to CAD back and also exchange rate difference between those times. Today it is Rs. 49 something for 1 CAD, a year back it was 44.

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Post ID: 189200 09-11-11 12:05:26
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ashedfc
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Quote:
Originally posted by JRF
I wouldn't think it would ever make any sense to any one to think about investment when there are open loans including Mortgage, car payments and enough to sustain at least six months...


Absolutely true... 100% correct


 
Post ID: 189205 09-11-11 13:04:45
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ashedfc
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Quote:
Originally posted by web2000

I have some money(Say $10000) sitting in my savings account. The only option I see to get guaranteed return is to put it in NRI fixed deposits which will yield at least 9% growth and be taxed. I do not see any better option in Canada to invest that small amount of money.
Can anybody provide some suggestions?


For 9% return the money is blocked for 1full yr (& deduct the TDS by the Indian bank whichever) + you still have the risk of investment being in Rupee, so the exposure to the currency markets will still be there.

In my personal opinion invest a major portion in Physical Gold in your own possession (its the most liquid & universal currency), it will protect its value & will give you much higher return over the same time frame. Look at today India has the highest Gold price (in Indian Rupees). In USD Gold is close to $1800 but in Indian Rs, its all time high. Even in Canadian Dollar its close to all time high.
Gold will just keep you protected against inflation & currency devaluation.


 
Post ID: 189206 09-11-11 13:07:37
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ashedfc
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Quote:
Originally posted by rajcanada
You have to factor in exchange rate losses for conversion of CAD to INR, from INR to CAD back and also exchange rate difference between those times. Today it is Rs. 49 something for 1 CAD, a year back it was 44.


In 2008, 3yrs back CAD was 47 on the Rupee.. so Rs has kind off kept flat against CAD. Its the USD where the volatility is seen (most of it is tied to the trade deficit)


 
Post ID: 189208 09-11-11 13:09:58
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skal
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Thx JRF for bringging out this topic. This will give idea to people on this forum what is going on with exchange rate.

 
Post ID: 189209 09-11-11 13:27:06
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