Government should tighten exchange rate management

Q&A: B Ramalinga Raju

. Excerpts:

The government is telling exporters to get used to a stronger rupee. You are one of the most affected industries. How would you react to that?

Irrespective of how the rupee or the dollar behaves, it is the duty of entrepreneurs to constantly enhance efficiencies. In an environment where exchange rates are moving in an unfavourbale direction, it is not a luxury.

Having said that, I believe that the opportunity for the country today to service the world is very high. The government should do its best to create an exchange rate level that encourages entrepreneurs to reach out.

If dollar inflows are high, maybe there could be mechanisms where the country could invest to a greater degree in overseas markets so that there is some stabilisation of the exchange rate. In the absence of that, we will lose a great opportunity.

We may still do reasonable well as an economy, but would we be able to do the best? Countries like China have, for a very long period, ensured that the exchange rates were favourably poised for greater exports.

What is the sense you are getting when you talk to the government about the rupee?

I used to be more active in Nasscom when I was the chairman (until March 2007), but I am not as intimately involved now, though I do know that the industry is doing its best to put across its point of view to the government.

Do you think there is slackness in the industry, that there is scope for the larger players to absorb this appreciation without getting hurt?

These are quite relative issues. If you are asking whether the industry would be brought to its knees and whether it would fail completely, the answer is no.

The point is whether 30 per cent growth is as good as 50 per cent? Or is 10 per cent growth alright? In my opinion, as we keep growing by servicing the world, we would help various other industries within the country itself.

So you are saying IT services is the growth engine of the Indian economy?

I am saying that we should not underestimate the importance of the country servicing and providing goods to the world because all said and done, the economy is still less than two and a half per cent of the global economy and we cannot afford to ignore global economic opportunities.

And it is not to be assumed that the markets will, all by themselves, determine the course. There is a responsible role that the government has to play in bringing about an environment that would be conducive to realisation of the potential.