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The rise in the value of Indian rupee may signal robustness of Indian economy but may not necessarily be good news for Indian outsourcing providers and their clients. In 2007, rupee’s appreciation against dollar has eroded about 11-13% of the dollar’s purchasing power in India while falling heavily on Indian It service providers. The inflow of Dollar to India at its all time high, be it through stock exchange or other route, it’s creating a surplus.

Offshore outsourcing and IT vendors are finding it difficult to cope with the appreciating rupee. Midsize IT companies like Syntel, Polaris, Mastek will suffer more than the bigger ones because they work on slimmer margins.

It does not mean though big players are not feeling the heat, Wipro has asked its employees to come six days a week, EDS and Mphasis are considering billing their client in rupees.

Is stronger rupee good for the country? Find out the debate in the next page. 

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Although I don't want to operate as an economist without a license :-), I am not sure whether a stronger rupee is good for the country. There is evidence to the contrary with countries such as Japan and South Korea having worse exchange rates. A country like China keeps its currency pegged against the Dollar to avoid losing its cost-advantage.

A stronger rupee necessarily means more imports and less exports - whether that is good for India in the long run is debatable. The IT industry is a very small portion of the economic output in India, i.e., only 1% of the total GDP. And India has a large industrial and agricultural base, which could be affected by the rupee appreciation.

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