Tuesday, July 16, 2013

FDI won't help us to reduce rupee depreciation

Foreign direct investment (FDI) in sectors like defence will help Indian companies get access to latest technologies. But we can't rely on FDI to control rupee depreciation. It will only help in short term. Foreign investors who invest money here will take profit back to their country. So its not a permanent solution.

Our main problem is high population growth. But our Govt. is not doing anything to reduce this problem. Our trade deficit is increasing because we don't have enough natural resources needed for our increasing population. Our natural resources are depreciating while our population is increasing. The rate of depreciation of natural resources is directly proportional to rate of increase in population.

Some people are claiming that rupee depreciation will help companies in sectors like IT to increase their profit. But this will not last long. Due to rupee depreciation people are facing problems like inflation, high taxation etc. Companies which make loss will face more problems. Companies which make profit will face more tax burdens.