India Reaches Trillion Dollar Economy
Nevertheless, it is still noteworthy, that India's GDP have now surpassed the trillion dollar level. This was reached a lot faster than expected as the Indian rupee has appreciated sharply during the most recent month.
Unlike the Chinese who have been foolishly dragging their feet and refused to allow any significant appreciation, despite the enormous losses this implies, India have allowed a really sharp appreciation during the recent month. As late as March 19, the dollar costed more than 44 rupees. Now a dollar cost just 40.8 rupee. This implies a 7.5% appreciation in less than six weeks. By contrast, the Chinese yuan appreciated a mere 0.3 % against the dollar during the same period. Indeed, during the entire 21-month period since the traditional 8.28 yuan peg to the dollar was loosened, the yuan has appreciated a mere 6.8%, less than the Indian rupee's gain during six weeks.
India's currency policy is much wiser than China's for reasons that I've explained before. Namely, that it achieves a certain level of monetary tightening by means that enables them to buy foreign goods at a lower price. The traditionally argued disadvantage to a stronger currency, namely job losses in the export sector, is not a real disadvantage as alternative tightening measures would have implied job losses too.
While India's wiser currency policy is not -particularly not in the long term- enough to overcome the other structural disadvantages it has to China, it certainly means that in the short- to medium term outlook I have become more bullish on India relative China, than I used to be.