Impact Of Rupee Exchange Rate On Business Opportunities In India

We published a research paper titled "Impact Of Rupee Exchange Rate On Business Opportunities In India" in the IOSR Journal of Economics and Finance and the paper can be accessed here: Link to the journal

In this paper, we have presented the impact of Rupee exchange rate on business opportunities in India from a macro economic perspective considering the indicators such as Consumer Price Inflation, Gross Domestic Product and Index Of Industrial Production.

Abstract: In this paper, we present an analysis of the macro economy in India with respect to the exchange rate of the Rupee and de regulation of oil prices. These 2 factors have been critical in deciding the business competitiveness of the economy and their individual effects are studied. Various business competencies arising from strong and weak Rupee as well as de-regulated prices of oil are discussed. 

In continuation with the analysis expressed in this paper, we would like to share the following analysis:

The Rupee exchange rate in India is linked to the trade deficit (imports - exports). Higher trade deficits lead to a weaker Rupee. Considering an economy which has certain total imports x and certain total exports y, if the exports start dropping and imports (of consumer goods) start increasing, it might be a cause of concern (on the competitiveness of the economy). A currency depreciation might boost the exports in the short run, by making them cheaper. 

But consider the case of India. Here the primary imports are all in energy: oil, natural gas and coal. When the imports increase, we are importing more energy, and that is because the economy is doing well  and we are producing and selling more (domestically and internationally). In this case, should the Rupee depreciate with increased imports? Think about it.

(Petroleum accounts for 34% of India's imports. Data source at tradingeconomics.com)

On another note, Japan manages to import energy (oil) to meet 42% of its energy needs, but does not see any inflation even if the Yen depreciates from 75 to a US Dollar to 100 to a US Dollar. This is not the case with India. As is evident from the above research paper, a depreciation of the Rupee vs US Dollar will lead to higher inflation in the country (data from 2010 to 2014).

The below graph shows the energy imports in India as a percent of total (Data from: tradingeconomics.com)

source: tradingeconomics.com

ENTREPRENEURSHIP SUMMIT 2015

Today I made my way to the Entrepreneurship Summit 2015 organized by the Social Entrepreneurship and Consulting Cell at Symbiosis Institute of Business Management, Pune.

This is the annual event where SECC invites eminent entrepreneurs to chat with the students and inspire them. There are panel discussions, entrepreneur stories and SymbiHaat - the food festival organized by SIBM students.

The first speaker today was Mr. Paavan Nanda, who is the co-founder of ZOSTELS and ZO-ROOMS.  ZOSTELs are hostels for back-packers that offer affordable and comfortable hostel rooms. They are located on most visited backpacker routes such as Delhi-Jaipur-Jodhpur and Goa. They started off with the idea during their college days at IIM Calcutta and built the first ZOSTEL in Jaipur. They secured funding by participating in start-up competitions and ended up winning all the 14 competitions they participated in, which included the one at India-Wharton Business Summit. From hostels, they moved into budget hotels that are standardized in terms of the amenities and services they provide. ZO-ROOMS expanded rapidly and they operate primarily by converting existing not so well managed hotels into standardized format hotels. What I found inspiring about the talk is that they decided to build a business model around backpacking and signed up with MTV to help them create brand awareness for their hostels. 

The second speaker today was Mr. Milind Sharma, who is an alumnus of Symbiosis School of Economics. He is the co-founder of NuovoEx and PepperTap. Both these start ups operate in the hyper local business format providing logistics services in the business to customer link. NuovoEx provides reverse logistics for the goods the people return when they are bought online from stores such as Flipkart and Snapdeal. PepperTap provides home delivery of groceries from the local store to your home. Mr. Sharma started off with NuovoEx in Gurgaon, working off from a small store in a local market. NuovoEx saw rapid growth as the online retail space saw exponential growth over the last 5-6 years. PepperTap is a more recent venture and is currently operating in 14 hyper local market places across India. They sign up with retail stores and hyper markets and serve 4-5 km area around these stores. It is a promising business model as food retail through hyper markets has grown very rapidly with the development of stores such as MORE and Reliance Fresh. 

The Entrepreneurship Summit 2014 saw founders of Pinstorm (Mahesh Murthy), Goli Vada Pao (Venky Aiyer), Rolocule Games (Rohit Gupta), Doolally (Suketu Talekar), The Pint Room (Pradeep Gidwani) and CarIQ. These were inspiring talks and revealed first hand the life of an entrepreneur. Loved listening to them.