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How India will get affected?

Advantages

Improved Export

As compared to before revaluation of RMB, the Indian products will be cheaper now and India Inc. surely would be able to capitalize on this opportunity.

Outsourcing Advantage

Apart from IT and ITES, India's relatively cheap labour will be now exploited by the US firms. As the Yuan appreciates, the NPV of investment in China will start decreasing, the money might be diverted to India as well.

Disadvantages

Absence of Cheap Chinese Goods

There will be same effect of revaluation to India as I have previously discussed in case of USA.

Regarding to rest of the world, some of the Asian currencies are also expected to see the upward movement. A revaluation may break the monopolistic market that China has held till now over the US export market and open up trade opportunities for the rest of the world.

Conclusion

In July'05, China allowed its currency to appreciate by 2.1% and permitted daily fluctuation of upto 0.3%. This has aroused every one's curiosity as to what effect it will have on economic growth.

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* Contributed by -
Jyoti Singh,
PGDBM 2006,
IMT, Ghaziabad.