What happens if 1 Rupee becomes equal to 1 USD?
The currency of the US is one of the most valuable currencies in the world. This currency is used to value the majority of international transactions and exchanges. The dollar’s value has always been more significant than that of other currencies. This is why many nations feel their currency should be valued at one US dollar to improve their economies.
At this moment, one dollar is worth approx. 75 rupees, but many people, including you, wonder what would happen if India’s 1 rupee gets equal to 1 dollar. Will this be good for India, or will it result in significant losses? Or why did the Rupee lose less value than the dollar?
Let’s look at an example to help you understand the issue. This happens without a large shift in productivity or a significant drop in real wages.
The monthly remuneration of a doctor is Rs.1 lakh rupee. This person’s talents are comparable to those of a guy earning $10 million in the United States.
What if one US dollar is equivalent to one Indian Rupee, and this guy’s productivity and pay stay the same? The Indian man’s salary jumps to $100,000. After a few events, he is happy with his earnings and proceeds to purchase fashionable items from the Apple store.
Why would a hospital pay him 1 lakh dollars when you can hire someone for 10 thousand dollars in the United States? Of course, they wouldn’t. Consequently, every Indian – engineer, teacher, accountant, and designer – would lose their jobs, and work would be relocated to other countries where people are cheaper. Companies would uncover technology that prevented employment from being relocated outside India (such as cleaning). An outstanding robotic vacuum cleaner costing $1000 would be used instead of the $4000 pm human cleaner. Many other professions that rely on them (restaurants, cafés, retail shops, tourism, airlines, and so on) become outdated when people lose their employment.
As people are fired, they will be prepared to work at lower and lower salaries until they fall below the global benchmark of $2500. Excellent engineers would earn Rs. 2500 per month if 1 USD equalled 1 INR. How would they pay off their home, car, and gadgets EMIs (interest-bearing loans)? They won’t be able to; thus, they’ll default.
Due to massive sums of past-due loans, the banks would go bankrupt. Investors would leave, forcing the government to print an enormous quantity of money to keep the banks viable. As a result, inflation would rise, and the currency would fall where everything is worth Rs. 75 per dollar. At that point, Indian pay will be so low that employment will return, and the cycle will repeat.
Some pros and cons if 1 rupee gets equal to 1 dollar
1. When the value of money and the dollar are equal, the first advantage is in the case of imports. India may purchase all of the goods that are imported from other nations at meagre costs since most of the items we use in our daily lives are imported from other countries. So, if one Rupee equals one dollar, the government of India may purchase the identical product for a fraction of the amount it paid before. And if the government has to pay a low price to acquire anything, it will typically strive to provide us with that item at a lower price. People may get the newest iPhone, which costs $1000, for just $1,000.
2. Travelling to another nation is less costly – Now, if someone wants to travel on a foreign holiday, they must consider their money, which is relatively high. Therefore, travelling will be less costly if the value of 1 INR is equivalent to 1 USD.
3. Brain Drain will come to a halt or be reduced. If a job in another nation pays the same as a job here, people will not choose to work there.
4. The expenses of international shipping and logistics will be minimized.
1. Exports would be more costly if the Indian Rupee and the US dollar had the same value because Indian items would be more expensive than those from other countries. In recent years, Indian exports have been increasing. Why would any nation purchase from India if other rivals can provide the same service for less money?
2. People will choose to invest in other nations where they can pay less for resources such as land, human resources, and so on. Hence foreign direct investments would plummet. This has a significant impact on the IT industry since many international corporations outsource IT work to Indian firms. They would start outsourcing them to other nations where they may pay less if the Rupee becomes equivalent to the dollar. Many jobs will be lost as a result of this situation.
3. Foreign corporations invest primarily in our nation’s IT and service industries, and these sectors account for 60% of our GDP. And these industries employ 27 per cent of our country’s workforce. It will be fully shuttered if foreign corporations quit investing. This will result in a considerable rise in the country’s unemployment rate. Aside from that, as the cost of different items decreases, robots will be employed more in the workplace than employees, resulting in a massive rise in unemployment. People will accept to work on the bare minimum as a consequence. Then we have to deal with such issues.
4. There would be a severe economic slowdown if money did not enter India. Companies that are presently investing in India will begin to withdraw their investments. In addition, job outsourcing in India would be prohibited. Increased Unemployment – As foreign investment declines, employment declines as well.
The misconception around people
According to current exchange rates, $1 equals $75. This does not imply that the US economy is 75 times larger than India’s. This, however, is a fundamentally faulty premise. The Indian government is not focused on strengthening the Rupee. They are, however, grappling with the efficiency of stabilizing currency rate swings.
That implies the currency should strengthen gradually, rather than all at once. The country’s production should determine currency strength. Any international corporation is willing to pay a $1,20,000 wage to an IT specialist if he can increase productivity by 70 times.
The Indian Rupee will gain strength as a result of this cycle. Though relativity is crucial, it should not be misinterpreted in this context. The Rupee should not be labelled a weak currency because 75 units of Indian cash equal one unit of American currency.
Edited by Prakriti Arora