Understanding the economy

[Shringarey]

Sly,

Who decides that? Who decides that $1=Rs 50?? - The market. What does it mean?? It means that Indians who export want rupees for their software, tea, jute, etc. But US pays only in dollars. Similarly, US exports machinery and defense to India and expects dollars. But Indian mfgs have only Rupees. So they purchase dollars from importers. Depending on the import/export situation, dollar rupee fluctuates

Shring

[SlyBoots]

Mujhay kuch bhee theek say nahin samajh aaya .

Aisay samjhayo jaisay 5 saal kay chotay bacchay ko samjhaatay hain .

Kyaa honay say ek rupyaa pachaas dollar kay baraabar ho jaayegaa ?

[echarcha]

Originally posted by SlyBoots
Mujhay kuch bhee theek say nahin samajh aaya .

Aisay samjhayo jaisay 5 saal kay chotay bacchay ko samjhaatay hain .

Kyaa honay say ek rupyaa pachaas dollar kay baraabar ho jaayegaa ?

You are syaing that when will 1 Rupee be equal to 50 US dollars.

Well Shring has tried to explain that but let me attempt once more.

Basically a currency is valued by its value in international markets. For that a currency needs to be from a open market. Means Indian economy has to be an open economy. For example US economy is open. People from Hong Kong or Malaysia or any other country can invest in US markets. Whereas with Indian markets you cannot do that without a plethora of government regualtions.

So our Rupee really does not have any value outside India. Only when people from outside India can use Rupees to pay off for services or goods will the value of Rupee will go up. Today you can use the US dollar in almost any country in the world in exchange for goods or services.

Since many countries dont have currencies which are internationally valuable the phone companies work like this. Say you make calls to USA from India. VSNL handles these calls. Now I make calls to India from USA. AT&T or MCI or Sprint handles these calls to India.

Now this is how it works - A rate is fixed for a call (on a per minute basis) which is agreed to by both phone companies. Then lets say USA maked 1200 calls to India. India makes 1000 calls to USA. So now India has handled 200 more calls from USA to India. So USA owes India money for 200 calls. Many times actual dollars or moeny never is exchanged and the calls are adjusted against the number of handled calls and number of calls made.

But our VSNL had very high rates for handling calls from India. Hence teh calling rates from USA to India are quite high. Recently the Indian govt. reduced the tarrifs on calls and so we can make 30 cents/minute calls to India. Even India can now make calls to USA at Rs.24/minute.

[Rahul]

Originally posted by echarcha
But our VSNL had very high rates for handling calls from India. Hence teh calling rates from USA to India are quite high. Recently the Indian govt. reduced the tarrifs on calls and so we can make 30 cents/minute calls to India. Even India can now make calls to USA at Rs.24/minute.

But all the official big carrier like AT & T never come down then 42 cents, but companies who used net telephony like Noblecom, and falana falana coms, they even offer 25 cent minutes, its not becuase Indian govt down the price, its becoz they regaularize the netphony. What I mean is, even after getting VSNL prices low, the prices for calling to India from US didnt come down

[echarcha]

Originally posted by Rahul


But all the official big carrier like AT & T never come down then 42 cents, but companies who used net telephony like Noblecom, and falana falana coms, they even offer 25 cent minutes, its not becuase Indian govt down the price, its becoz they regaularize the netphony. What I mean is, even after getting VSNL prices low, the prices for calling to India from US didnt come down

No NobelCom and others dont strictly use net telephony. Only recently did India allow net telephony from within India.

See, I knew someone who had a telephone card business. This is how it works.

You ask a big carrier like AT&T or MCI for a leased line with certain capacity and certain limits on calls to India. They sell that to you for some amount which is cheaper than the 42 cents/minute you get as a individual subscriber.

Then you sell this bandwidth by way of calling cards. Since your costs are fixed and your line usage is already ensured for certain number of calls, you charge a bit more than your cost and sell such cards.

For home users, the phone companies are not sure that you will utlise a minimum number of minutes. Hence they charge you a bit higher to cover for expenses of maintaining bandwidth for your calls.