Muhith agrees to common trade currency (Indian Rupee) for India-BD trade

[neehar]

Not bad apparently..What are the possible disadvantages?

as the trade is done in rupees if the bangladesh decreses buying from india then the demand for rupee decreases so does its value.and we have to spend more to buy on our imports like petroleum ,gold etc..if bangladesh is buying more the demand for rupee rises and it may results in inflation in our country if mismanaged. but the trade being now small compared to our economy its easier for us to control it.if bangladesh stops trade with india then all the additional currency if printed comes back to india and the inflation rises.so theres a higher risk to our country..but as the trade increases the rupee strengthens and rupee will be more coastlier to buy..however it'll be less than buying a dollar so things would be still good for bangladesh..but as the trade rises the above problems i mentioned above inflation and other things will become tougher for us to manage if anything goes wrong..


so it has bad sides too

 

[Azazel]

It might prove good for BD.Both Rupee and Taka is fluctuating against US Dollar so much now a days.By the time an importer in BD buys US Dollar and converts it to Rupee,He may lose a lot of money due to the Dollar fluctuation.He can save that lose by directly buying INR in exchange of Taka.

 

[neehar]

I don't think it would affect reserves in any ways. We'd accept INR but spend all of it plus USD eight times its value (USD 0.5 billion export vs USD 4.5 billion import) on import from India.

Now we import products from India worth 9 USD and gain 1 USD from export to India. That is net transfer of USD from BD to IND is 8 USD. If we accept INR then instead of gaining 1 USD from export we would get equivalent INR say x. Then while importing products worth 9 USD we would give you 1 USD = x INR plus 8 USD, resulting in the same amount of net USD transfer.

yes but the value for rupee and dollar will not remain same compared to dollar will it??the cost of buying rupee is always cheaper than buying a dollar is'nt it??u can buy a dollar with 78 takas..but u can buy a rupee with about 1.5 takas...even if the rupee strengthens it'll be still cheaper than a dollar..

Another point is INR would appreciate more over BDT because of the increased demand of INR.

as i said even though the rupee strengthens it'll be advantage to u because its still less than a dollar.besides trade with rupee means higher risk to india than bangladesh as i said in #16

 

[Azazel]

Another point is INR would appreciate more over BDT because of the increased demand of INR.

Don't worry,RBI won't let that happen.Besides the Indo Bangla trade is very small for that to happen.

 

[asad71]

This will stabilize and strengthen I/Rs. What benefit is BD getting out of it?

 

[Jade]

From where they will bring INR???

Buy in international markets.

 

[Skallagrim]

Don't worry,RBI won't let that happen.Besides the Indo Bangla trade is very small for that to happen.

The demand for INR would increase in BD- RBI doesn't seem to have any role to play there.

 

[Sugarcane]

they'll print it if necessary..but theres something called CRR (cash reserve ratio) its the amount of money kept with RBI its 4% now..decreasing it would infuse additional money in to the system..it does it according to the local inflationary trends and demand for rupee..so when the demand arises .RBI just decreases it

Don't tell me that you are going to allow BD to print INR

 

[neehar]

Don't tell me that you are going to allow BD to print INR

why would BD print it?? they'll buy rupee from us instead of dollars from u.s."they" in my post is referd to our govt particulary RBI..i'll change it now

 

[neehar]

The demand for INR would increase in BD- RBI doesn't seem to have any role to play there.

rbi controls the demand by maintaining cash reserve ratio..(CRR) and printing additional money if necessary..yes rupee increases but our govt wont let it increase too much because a high value rupee gives us less returns on our exports..but it decreases our burden on our imports which means we have to spend less to get more..so govt decides a balancing point for the value..my guess it it would be somewhere beteen 40-50 rs/$ now its 54.but all thats just a speculation now..the trade between both the countries not not that great thet it influences the rupee much..but in future as the trade rises..there is a chance
Flame > Knowledge Center > What is CRR, repo and reverse repo rate?

 

[TopCat]

How about BD currency???

This will stabilize and strengthen I/Rs. What benefit is BD getting out of it?

BD currency is the way to go... Our central bank is the most prudent one in south asia.

as the trade is done in rupees if the bangladesh decreses buying from india then the demand for rupee decreases so does its value.and we have to spend more to buy on our imports like petroleum ,gold etc..if bangladesh is buying more the demand for rupee rises and it may results in inflation in our country if mismanaged. but the trade being now small compared to our economy its easier for us to control it.if bangladesh stops trade with india then all the additional currency if printed comes back to india and the inflation rises.so theres a higher risk to our country..but as the trade increases the rupee strengthens and rupee will be more coastlier to buy..however it'll be less than buying a dollar so things would be still good for bangladesh..but as the trade rises the above problems i mentioned above inflation and other things will become tougher for us to manage if anything goes wrong..


so it has bad sides too

Forget INR.. BDT looks more attractive to me...

 

[neehar]

How about BD currency???



BD currency is the way to go... Our central bank is the most prudent one in south asia.



Forget INR.. BDT looks more attractive to me...

as i said using taka would be more riskier to bangladesh than using inr to india..keeping everything in mind they'll decide things..bangladesh is just on safe side now.

 

[TopCat]

as i said using taka would be more riskier to bangladesh than using inr to india..keeping everything in mind they'll decide things..bangladesh is just on safe side now.

Let us bear the risk.. just dont worry about it..

 

[neehar]

Let us bear the risk.. just dont worry about it..

then u should tell ur policy makers.. :p

 

[TopCat]

then u should tell ur policy makers.. :p

I dont have to.. but those who are wet dreaming about common Indian currency, I got a news to tell, our central bank is much more prudent than those AHAMMOK politicians.