Rupee: Most Undervalued Among all Currencies

The Economist’s latest Big Mac Index has come up with a survey and declared Indian rupee to be the most undervalued currency. Currently rupee trades at around 61 percent below its actual price against dollar. 8 out of 10 Asian currencies are undervalued. The currency rating was done by analyzing how a particular good will carry different values in different countries. McDonald’s popular burger was t he chosen one to evaluate the costs of the same burger in different countries. Through this the effective purchasing power of different currencies is measured.

Swiss Franc and the Norwegian Krone which had a currency index more than 60 percent were the two countries which were overvalued compared to the U.S. dollar. Further down were Sweden Brazil with over 40 and 30 percent overvaluation.

Indian Rupee has been hitting the ground for the last two years. Ukraine, Hong Kong and Malaysia are close at over 40 percent undervaluation. China’s Yuan is the fifth most undervalued currency with over 40 percent overvalued with regard to U.S. dollar.

The last six months have witnessed 17 percent value depreciation of the rupee, which makes it more undervalued than Chinese Yuan, which is estimated to be standing at 41 percent. China has been under continuous pressure from U.S. to appreciate its currency and shift to a market-based exchange rate mechanism.

Big Mac has come up with a comparison between the prices of burger in the U.S., where it’s currently sold for $4.20. But in India the Maharaja Mac is priced at 84. The exchange rate of 51.90 to a dollar costs a burger in India for $1.62. The purchasing power parity (PPP) comes out at 20 when we divide the local price i.e. 84 by the U.S. price, i.e. $4.20. The currency is overvalued or undervalued can easily be calculated through the difference between PPP and the exchange rate. Previously when Big Mac Index came up with this statistics, the Indian rupee was trading at around 44.40 percent to a dollar, and was undervalued by 53 percent.

However, cheap burgers cannot be the deciding factor to know if a currency is overvalued or undervalued. There are different factors which states why a currency is overvalued or undervalued such as government policies hinder normal equilibration of exchange rates. Also the labor costs come into picture which plays a vital role in different countries.

Ajit Ranade, Chief Economist at Aditya Birla Group tweeted, “Reversal inevitable.” D K Joshi, Chief Economist at rating agency CRISIL added, “It is a proxy indicator and it does not signify much. But given our growth potential, capital inflows are expected to increase and there will be an appreciation bias.” An appreciation is on bet by most of the foreign exchange dealers, but the situation in Europe is under a close watch. The slower growth rate and perception of policy paralysis has shied off many foreign investors from Indian stock market, FIIs has withdrawn around 3,800 crore from the share market.

Related articles

• Latest Big Mac Index on Currency Undervaluation and overvaluation (nextbigfuture.com)
• Rupee falls to record low of Rs. 53.29 per U.S. dollar (thehindu.com)
• Rupee loses 17 paise in early trade (thehindu.com)

India’s Young Billionaire Heirs

They are the kids who are born to the most powerful parents on earth, meet the Young Indian Billionaires who will be the heirs to the thrones of their father’s and forefathers empires. These Billionaire kids have been sent to the best B schools to mould them as the future leaders for their billion dollar Indian companies. They have hopped into the shoes of their parents and want to stir the empire towards better horizons. Society and gossip columns track them like starlets and long wait for their one glimpse.

 Here is the list of the next Billionaires to come:

1. Rishad Premji:

Azim Premji’s first son Rishad has a Masters in Business Management from Harvard Business School and the 34 year old is currently the Chief Strategy Officer of the Wipro Technologies. He was considered the second most eligible bachelor in the county after Rahul Gandhi till he tied the knot with childhood sweetheart. Rishad, like his father, is interested in reading and music. It is said that Rishad reads quite a lot and during his spare time reads quite a lot of books, mostly relating to management. His younger brother Tariq, who is currently with the Azim Premji Foundation, is more of a friend. Family Net Worth: $16.8 billion.

 

2. Akash, Isha & Anant Ambani:

Akash and Isha, are twins and they are 19 of age and Anant is 16. These kids are more often with their mother cheering for Mumbai Indians at the IPL matches which is owned by their mother. They are the next heirs to an empire which is worth $27 billion.

 

3. Ananyashree, Aryaman Vikram and Advaitesha Birla:

The Three Musketeers of Kumar Mangalam Birla and Neeraj have a family empire that is worth $9.2 billion to inherit. The Aditya Birla Group operates in over 27 countries with more than 130,000 employees worldwide. The group has diversified business interests and is dominant player in all the sectors in which it operates such as viscose staple fibre, metals, cement, viscose filament yarn, branded apparel, carbon black, chemicals, fertilisers, insulators, financial services, telecom, BPO and IT services. The Aditya Birla group is a $ 30 billion conglomerate which gets 60 percent of its revenues from outside India.

 

4. Anmol and Anshul Ambani:

Anmol, 20 and Anshul, 16 are the sons of Anil Ambani. The chairman of the Reliance Anil Dhirubhai Ambani Group will pass on a net worth of $8.8 billion to his sons. Reliance Anil Dhirubhai Ambani Group is one of India’s largest conglomerates. It has a market capitalization of $ 81 billion, net assets $29 billion.

 

5. Eiesha and twin sons Kavin and Shravin Mittal:

Sunil and Nyna Mittal of the Bharati Group are blessed with three children. Shravin Bharti Mittal, 23, one of twin sons of Sunil Bharti Mittalholds of a degree in accounting and finance from the University of Bath in the UK. Shravin Mittal joins from JP Morgan Cazenove in London where he was an analyst in the technology, media and telecommunications division of the investment banking unit. He had earlier worked with Merrill Lynch in New York and Ernst & Young in London. The three are heirs to an empire worth $27 billion.

 

6.Aditya Mittal:

Aditya Mittal is a CFO of the world’s largest steel firm ArcelorMittal, He has a Bachelor’s Degree in Economics with concentrations in Strategic Management and Corporate Finance from the Wharton School of the University of Pennsylvania in the United States, from which he graduated magna cum laude in 1996. He worked for a short time in the mergers and acquisitions department at investment bank Credit Suisse First Boston. He joined the family business in 1997 and was appointed Head of Mergers and Acquisitions in 1999, and has been involved in several purchases since then as Mittal Steel has played a major role in the consolidation of the global steel industry. Aditya Mittal is married to Megha Mittal, owner of German fashion company Escada. He has one sister, Vanisha, who is married to Amit Bhatia and is a board member of ArcelorMittal. There are given an empire worth $31.1 billion.

 

7. Shashwat Goenka

Son of Sanjiv Goenka, Vice Chairman of RPG enterprises; a $3 billion firm that has interests in power, transmission, technology, retail and entertainment. Twenty-one-year-old Shashwat will, no doubt, join the business after graduating from theWharton School, where he is earning his business degree. The family net worth is $1.4 billion.

 

8. Siddhartha Mallya:

Inheritor of one of the world’s largest alcohol companies, an airline company and an IPL team. Siddhartha, 24, son of UB Group’s Vijay Mallya was educated at Wellington College in the UK, followed by Queen Mary’s College in the University of London. Mallya also has two daughters Laila and Tanya, from his second marriage. The family net worth is $1.4 billion.