To put the matter in right perspective, it is important to understand that the software industry, which has seen a meteoric rise the last 15 years, has been helped to a very large extent by the economy and the exchequer. The rupee depreciated from 1992 to 2003 by almost 100 per cent against the dollar (it depreciated from Rs 24.5 in 1992 to Rs 48.5 in 2003), and this definitely helped the software industry become the most profitable in the country.

On the other hand, this depreciation of the rupee had a huge impact on the domestic economy as also the manufacturing and other industries. Due to this unprecedented depreciation of rupee, the country has had a very high interest rate regime and also high inflation impacting the common man severely. All this to some extent impacted GDP growth as well. It was not only depreciating rupee that helped the software industry but also the way this sector was given the favourable treatment on all the fiscal policies.

The Indian manufacturing industry has really put its house in order and managed rather well the shocks of high interest rates, the depreciating rupee and also the high cost of energy. It is only during last three years we have seen interest rate coming down, inflation moderating and the rupee appreciating. The stable rupee for last three years and the little appreciation now have helped the country overcome to some extent the shock of high energy cost.

Since India’s is not an export-led economy and external trade is just about 13 per cent of GDP, rupee appreciation will not really have a major negative impact on the growth. However, certain sectors which are largely dependent on exports, for instance, textiles, have been rightly given short-term relief that should help them to stand on their feet quickly.

It is absurd to think of and ask for any relief to the software industry, which is not only very mature but also highly profitable. Its profit margins have at best been impacted by just about 3 per cent on an average margin of over 30 per cent and to think of any help at that level at the cost of economy is beyond reach.

To sustain the economic growth of 9 per cent, India needs to spend a huge amount of money on infrastructure projects. It is estimated that country would need over $400 billion in the next five years to spend on infrastructure. The domestic saving rate is rising very well but yet not sufficient to meet the total requirement of capital to build the required infrastructure.

In this situation, it is crucial that the country attracts foreign capital for investing in infrastructure projects.

Hitherto infrastructure growth was happening at a slow pace due to the high rate of interest, the high inflation levels and a depreciating currency.

In view of huge requirement of foreign capital, it is of utmost importance that the country has an appreciating currency to instil the confidence among foreign investors. Thus, an appreciating currency is the need of the hour and any lobby against this is counterproductive and going against the economic growth story of India.

It is widely expected that we would have a net accretion of foreign exchange inflows of $50 billion this year, which would definitely help the rupee appreciate further. It is rather unfortunate that software companies are blaming the Government and the RBI for not doing enough to stem the rise of rupee. I think the RBI has done an excellent job of managing inflation, interest and foreign exchange. The primary concern of the RBI is management of inflation, and an appreciating rupee is definitely helping the central bank achieve that.

When faced with high cost of crude oil, the appreciation of rupee has helped avoid the country raising petrol and diesel prices much to the relief of the common man. One would expect the exporting sector, in the larger interest of the country and the common man, not to lobby against appreciation of rupee.

I think the rupee’s appreciation against dollar has to be viewed in the larger context of demand and supply of the American currency in the Indian economy and also its weakening against major global currencies.

We are continuously seeing weakening of dollar against most currencies and I am amazed that most of the savvy CFOs of these companies could not see the writing on the wall of a weakening dollar and kept increasing reliance on their dollar account and are now crying from the rooftop and blaming the government and the RBI for their miseries.

Only one quarter appreciation of rupee has made this industry jump so much and I do not know what it will do when the rupee really starts appreciating backed by economic fundamentals and global weakness of the dollar further during the year. It is high time that one of the most mature industries — software — rises to the occasion and starts looking at ways and means to further improve productivity, pricing power and reduction of cost rather than looking for easy solutions of depreciation of rupee.

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