Source #Quora What will happen when USD==INR-1? Let us assume that such an event happens overnight without a drastic change in productivity or a massive drop in real wages. A good Indian engineer makes Rs.75,000 per month. Skills wise, this guy might be comparable to a guy making $3000 in the US. What if 1 USD becomes 1 INR and this guys productivity and salary stays the same? The Indian guys salary becomes equal to $75,000. Before he is happy with his paycheck and go on to buy hot gadgets from the Apple store, a few things change. Why would a company pay him $75,000 when you can get someone for $3000 in the US? Of course they would not. So, every Indian - engineers, teachers, accountants, designers - would be fired from their jobs and jobs would move out of the country as workers are cheaper outside India. Where you cannot move the job outside India (such as cleaning), companies would find tech. An awesome robotic vacuum cleaner worth $1000 would be used rather than the $4000 pm human cleaner. As people get removed from the jobs, plenty of other jobs that rely on them (restaurants, cafes, retail shops, tourism, airlines...) go kaput. As people get fired, they will be ready to work for lower and lower salaries, until their salary drops below the international level of say $2500. Since 1 USD = 1 INR, that would make great engineers make Rs.2500 pm. How would they pay their EMI (mortgage) on homes, cars and gadgets? They cannot and they would default. The banks would have huge unpaid loans and they will go bankrupt. Investors would exit and government would have print a lot of money to keep the banks alive. That would spike up the inflation and push down the rupee so much that things get back Rs. 60 = 1 USD. At that point, the Indians wage will be so low that jobs will move back again and the cycle would continue.
Posted on: Wed, 10 Sep 2014 07:17:22 +0000
Trending Topics
Recently Viewed Topics
© 2015