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Saturday, July 07, 2007

One man's meat...

High time someone showed Indian forex spenders (importers, travelers, students abroad) some love. The disparity of India's fiscal policy of favoring exporters must have tempted even providence - that pushed the $$ mercilessly down.

I don’t need be a great economist to bring some hedging sense here. When the IT service providers earned billions of $$ and booked huge profits because of a depreciating Rupee, the big boy exporters were quick to paint it as their business profit. It boosted their EPS, their stock prices soared and the shareholders walked away with lavish dividends. None cared to ask `what if' rupee appreciates back then.
Their grief would’ve been much less now had they anticipated a trend reversal and opted to credit those *abnormal gains* to a separate Exchange Stabilization Reserve account (ESR) and use those credits to set off future losses from trend reversals. The logic – earnings will get hit only to the extent such exchange losses overflow ESR credit. Over time, the fiscal `astuteness' would translate into higher stock prices as well.

Enough of forex prudence. My newfound status - a one-man-lobby for importers / outbound tourist…I’m loving it already. Any backers…?

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