In past few months dollar deluge, its effect on appreciating the rupee against the dollar and deletrious impact on India's export sector most visibly the IT sector - engine of India's economic boom in last many years has people of all hue quite worried- whether RBI bankers, IT people, other exporters or Government. The cut in US interest rates may deepen the problem as significant portion of dollar flowing out of bond market and even share market may find santuary in Indian share market. RBI has taken a few steps to check this problem over last few months. Following are some of other options which to best of knowledge RBI has not taken so far (??)
1. Subprime woes in US and Euroepan countries gives a great opportunity for cash rich Indians to buy real estate in US. This will considerably dent US dollar inflows. If such measures couldbe undertaken by other countries like China etc US housing market problem may see a soft landing. Incidentally this also shows that if there are more than one or two truly economically strong countries, suitable policy actions could result in win-win outcomes for all countries, mitigating business cycle impacts in one country and spreading its export around the world. Ofcourse riders could be put ( & will need to be put) on capital gains, repatriation of funds if properties purchased are sold off etc within a certain time period
2 Similary real estate companies could be allowed to take up ambitious projects abroad in JV abroad. This could provide valuable experience in learning by doing in hi-tech secure energy efficient residential and commercial projects with spinoffs in other areas in future . All of this need not by done in US where oversupply is a problem. What is true for share market investing is likely to be good for real estate investments as well- buy when chips are down and sell when prices sky rocket.
3. By extension allow Indian firms to take up /acquire key assets/natural resources abroad in a bigger way.
4. Also surplus dollars couldbe deployed by Govt/firms to take up high risk-high return projects which provided strategic advantage in future- development of state of art defence technologies if these are permissible, technologies which could application in rural areas, in medicine . Given the developments in Indian corporate world in recent years, there is probably a high appetite/unmet demand for highly visible, image enhancing and most importantly truly productive high risk investments in the cash rich corporate world . The list is limited by our imagination.
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