Tag Archive: China

Imagine the Indian rupee having the status of a global currency. This might seem more of a fantasy and less of reality. But this was the picture of the Rupee some 50 years ago. However, the two major financial crises in 1966 and 1991 led to the consequent devaluation of the rupee. In the present scenario, it is no secret that India is achieving robust growth with an average increase of about 9% in its GDP every year. This might lead to the belief that the Rupee must also have been making significant progress. However the reality is quite contrary. It’s astonishing to know that the reason behind this is the Indian government itself. Had the government not interfered, the rupee would have been soaring high as expected. What forced the government and the RBI to suppress the growth of the rupee? Let us see the reasons behind the government’s bizarre actions.

Since the last few years the government has been doing its part to keep the Indian rupee in a low profile. In plain words the Indian government has been preventing it from gaining strength against other currencies especially the U.S. dollar. This is done in order to protect the Indian exporters particularly the IT sector followed by the jewellery and the textile sectors. Since these sectors are the major players in our economy, the government and RBI are keen to control the growth of the Indian rupee. The role of the apex bank is significant in this regard. Stronger rupee will be a severe blow to all the exporting firms. And there is the example of how China spread its goods across the world through the cheap Renminbi.

Several counter arguments have been raised stating that “A strong rupee does not imply weak imports”. The best example to this statement is that of Japan and Germany. During the 70s and 80s, Japan made remarkable progress in its global exports trade while simultaneously Yen gained significantly against the Dollar. High production technology and good quality has been a characteristic of the Japanese goods. Even Germany has been the world’s largest exporter of hi- tech goods despite its strong currency. This feature is however absent in the Chinese goods. It’s disturbing to note that even Indian goods lack this feature. As the rupee gains, the IT sector will be affected to a drastic level as most of the outsourcing jobs by the U.S. are driven by the weak rupee. However, it’s inevitable that for the future growth of any sector, new technology and better quality is the key.

A strong rupee can actually be the solution to this problem when viewed from a different perspective. For one, it would bring down the cost of technology – mainly the capital equipment and raw materials which in turn can produce better exports. This would revolutionize the manufacturing sector in India. But some losses cannot be avoided i.e. those who fail to make a transition from mere cost-arbitrage to a competitiveness driven by technology and quality. However the major firms in the exporting sector will be able to make the transition. The strong belief for this comes from the fact that the people and companies from this country are involved in development of high technology all over the world. It is just an artificially cheap rupee that prevents them from doing the same in their homeland.

Of course, there are several additional benefits to reap from the strong rupee. It will reduce the inflation through cheaper imports of several commodities particularly oil. The Indian government will also be able to issue rupee denominated bonds to foreign investors for infrastructure projects which will in turn help the rupee to regain its lost glory. Half a century ago it was a key currency for trade, spreading from UAE in west to Hong Kong and Malaysia in the east. The rupee was quite strong then, 4.75 to the U.S. dollar compared to the high 40s now.

The government has announced a unique symbol for the rupee (read here). This might mark an end to the era where it tries to erode the strength of the rupee. “Strong symbol implies strong substance”. This should be the future of the Indian rupee.

– Radha Krotthapalli

It is highly likely that the last time that you went to your friend with a question, you met with the familiar response, “Just ‘Google’ it dude!!”

So would be the case in many other places in the whole wide world, but possibly not so in dragon land (yes you guessed it right, China).

So when one fine day Google announced that it intends to stop honouring Chinese laws due to issues related to cyber security (Jan 12, 2010 to be precise. Google claims that digital bandits in China stole some of its computer coding and attempted to break into the e-mail accounts of Chinese dissidents), people said that they might just be bluffing, because they believed that Google wouldn’t readily exit the world’s biggest market of internet users. Contrary to popular belief, China is one of the few nations where Google has not been able to establish itself in a manner that it would have desired. A little number crunching will probably provide a clearer picture –

It is estimated that China will account only for around 2% of Google’s total revenue in 2010. That is nothing but a drop in the ocean for Google. Exiting China does not mean much to Google if we talk about the near future. But taking into account the fact that as of last year China had the largest Internet population, second largest number of searches conducted, and the search engine market size reaching 1.72 billion Yuan (or about $252 million USD) in Q2 2009 (source: iResearch) it seems that Google pulling out is not too plausible, as it would mean Google losing out on the lucrative growth. Google China (Google’s Chinese Extension) serves a market of mainland Chinese Internet users that was estimated in July 2009 to be 338 million. This estimate is up from 45.8 million in June 2002, according to a survey report from the China Internet Network Information Center (CINIC) released on June 30, 2002. Google is outranked only by homegrown Baidu in terms of the approximate revenues of the respective companies. Exiting now would mean that Google would have to concede considerable ground, which it has gained over the past 4 years, to Baidu. Not to forget that Google’s exit would open up the Chinese market to other international players as well, the most notable being Microsoft. Also the investment made by Google in the launching of Google.cn goes waste.

Google never had a Chinese arm (if you may call it that) to begin with. It was only in 2006 that Google decided to set up a server in the Chinese mainland thus subjecting itself to local laws. These laws required Google to censor every website that the government considered a potential threat to law and order in the country. The number of such sites was, to say the least, staggering. This decision of Google’s raised a lot of hue and cry in the free world, with a large number of people condemning the move, alleging that this decision was completely financially motivated and that Google had gone against its principals (coincidentally ‘Don’t Be Evil ‘ happens to be its tagline). The following quote from the New York Times wonderfully puts things as they were into perspective,

“What eventually drove Google into China was a carrot and a stick. Baidu was the stick: by 2005, it had thoroughly whomped its competition, amassing nearly half of the Chinese search market, while Google’s market share remained stuck at 27 percent. The carrot was Google’s halcyon concept of itself, the belief that merely by improving access to information in an authoritarian country, it would be doing good.”

When China is being talked about, can we possibly leave India out of the picture?

Google may finally decide to wrap up operations in China, because it may have realised that they are fighting a lost cause and might as well channelise their resources into more fruitful economies. And this is where India walks into the picture.

In India, 89% of Internet searches go through Google, 68% of India’s social networking occurs on Google’s Orkut service and 82% of media is viewed on YouTube, according to the internet marketing research company Comscore. Astonishingly, Indian users spend almost 30% of their entire online time on Google sites – three times the world’s average. Why would any company not want to take advantages of these statistics?

Completely pulling out of China will help Google garner immense worldwide support (something that any company doesn’t mind) and gain a lot of sympathy. People will see Google as a victim of wrongdoing. It will actually enhance the company’s image as one which takes its corporate social responsibility seriously and is actually committed to the welfare of people, and thus generate goodwill (which any company doesn’t mind either).

Even though a huge cry was raised over this issue, Google keeps censoring the results on google.cn till date, indicating that it is not really willing to leave China completely, and neither is the government too keen on letting it leave as it would reflect poorly on them. The Chinese administration recognizes that it needs revolutionary innovators in IT, like Google, to help fuel the country’s robust economic growth, but being the good and faithful Marx-abiding regime that they are, the administration fears losing control of the educated public that may replace a programmed one.

It remains to be seen whether a middle path can be worked out that is in the interest of both the sides.

– Piyush Agarwal