The Financial Times reports on the U.S. dollar/India rupee dynamic:
India’s information technology outsourcing sector, which has been struggling this year with the growing slowdown in the US, has received help from an unexpected quarter – the country’s currency, the rupee.
Satyam Computer Services, India’s fourth-largest software outsourcing company, said on Tuesday a sharp depreciation in the rupee against the US dollar this year was expected to provide a direct boost to margins if it proved sustainable.
“The rupee has been very kind to us . . . it has depreciated almost 8 per cent in one month,” said Vadlamani Srinivas, chief financial officer at Satyam.
The rupee, which in 2007 appreciated about 12 per cent against the dollar, was the bane of India’s outsourcing companies last year – one of the country’s most crucial industries, generating more than $40bn a year in export revenue.
The industry incurs most of its expenses in rupees but makes the bulk of its revenues in dollars and other hard currencies, meaning that every rise in the value of the rupee squeezes its margins in India.