Next... Will there be a currency crisis?

After the economic downturn, will there be a currency crisis?


I recently, read an article in Economic times on currency crisis

The line which strikes me most was "According to Persaud, the only source of growth is to have a weak currency". Well!!.. well!! this seems to be inline with my thoughts, which I wrote early last year.

You can read more about my articles here... My scribbling 1, My scribbling 2

As you pen down your thoughts in a blog and later there is a supporting article, there is always a feel good factor within you!!

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Layman reference on some of the economic terms

Given below are some of the economic terms for people who might not be aware of some of the economic terms.



Balance of trade: The difference in value over a period of time between a country's imports and exports.

Budget Deficit : The budget deficit is the amount by which government spending exceeds government revenues during a specified period of time usually a year

Closed economy: A closed economy is one in which there are no foreign trade transactions or any other form of economic contacts with the rest of the world. For India prior, 1990 was considered as a closed economy and liberlization was started post 1990.

Collateral security: Additional security a borrower supplies to obtain a loan. For business loan, one might need to pledge land or house

Fiscal deficit is the gap between the government's total spending and the sum of its revenue receipts and non-debt capital receipts. The fiscal deficit represents the total amount of borrowed funds required by the government to completely meet its expenditure


Gross domestic product (GDP): The total of goods and services produced by a nation over a given period, usually 1 year. Gross Domestic Product measures the total output from all the resources located in a country, wherever the owners of the resources live.

Monetary policy: The regulation of the money supply and interest rates by a central bank in order to control inflation and stabilize currency.
If the economy is heating up, the central bank can withdraw money from the banking system, raise the reserve requirement or raise the discount rate to make it cool down. If growth is slowing, it can reverse the process - increase the money supply,
lower the reserve requirement and decrease the discount rate. The monetary policy influences interest rates and money supply.

Subsidy: A payment by the government to producers or distributors in an industry to prevent the decline of that industry (e.g., as a result of continuous unprofitable operations) or an increase in the prices of its products or simply to encourage it to hire more labor (as in the case of a wage subsidy). Examples are export subsidies to encourage the sale of exports; subsidies on some foodstuffs to keep down the cost of living, especially in urban areas; and farm subsidies to encourage expansion of farm production and achieve self-reliance in food production.

Economic growth: Quantitative measure of the change in size/volume of economic activity, usually calculated in terms of gross national product (GNP) or gross domestic product(GDP).

Per capita income means how much each individual receives, in monetary terms,it is the measure of the amount of money that each person earns in the country, of the yearly income generated in the country

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Vision India 2020 - Sramana Mitra

Vision India 2020 by Sramana, provides you with insight about 45 business opportunities, what more interesting is that she takes you into the future as how these unique opportunity business will turn out financially in 2020. She had thought through the future, in an interesting manner.



World knows that India has set indelible mark in the world economy. Cost effective outsourcing, manufacturing had been the contributors for the same (probably up to period 2008), this lead to the exodus of people from rural area to tier 1 city. So is India loosing its sheen of over utilizing tier 1 cities?.

Sramana's thought of major activities of business being carried out in small town adds better feasibility to these venture. Naturally, with cost of living in India metro's catching up with the developed countries, it would be a better bet for the entrepreneur to concentrate on small town.

The other point, which was brought in this book, is the usage of rural masses effectively in employment & revenue generation. I believe this is one of the critical dimension which an effective entrepreneur has to look at, in the next decade.

Finally, I wish to add one more dimension of my thought to it, the concept of "virtual office" (similar to Saas - software as a service concept). With high speed communication, video conferencing, mobile connectivity you may soon find people working from home, resort or even beaches and for any business - effective deliverable matters. The interesting point, is that the communication cost with additional features is really coming down over the years and whereas the infrastruture cost like facilities & real estate has been on the increase year after the year. Business at any point of time, looks at cutting cost, virtual office can become a real boon, if effectively utilized.

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STPI - Does it really impact indian IT services?

One of the expectation from the Indian IT industry is that STPI incentives provided to Indian IT industry continue beyond 2010, so that Indian IT industry is on the winning path against the competition from China, Brazil and Egypt.

There is no denial of the fact that, continuation of benefits are important for continuous growth, more importantly I feel it going to impact only small or medium sized IT companies. Bigger IT companies (tier 1) can still reap benifit by moving their operation to SEZ (Special Economic Zone).

However, one question which I fail to get an answer is that, how is the government going to tag a software product/services whether it is produced in SEZ or not?. With improved communication facility a software services can be developed/services provided at any place, including your home. Just for sake of it, IT companies can have office at SEZ and continue to reap benifit stating that they operate from SEZ, unlike manufacturing, physically tagging the development/product is not possible or it is going to be very difficult.

Hence I believe its going to be business as usual for bigger IT player and only smaller companies would find it difficult, as they need to have some physical presence at SEZ.

Again this is just out of my own thoughts, if any of the reader have better insight please comment.

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