Friday, February 02, 2007

There and Back Again - Part 5

One of the things that every trip to a new place entails is shopping. For places you have been before, you know what there is to find and so you carry enough cash to cover what you assume to be the maximum you will be spending. In cases of foreign exchange purchases, depending upon the value of your own native currency, you could make out quite well in the long run. For as long as I can remember, the value of the dollar versus the rupee (India's currency) has been rather one-sided with the dollar equating to many more rupees. What this means is the value of the dollar goes a lot farther when changed in to rupees. What this also means is that if the cost of goods is not similarly translated, the result to you the consumer is that you can get the same good at a much cheaper price than you would domestically. This is not only true of India but of other nations as well.

During our trip we went to Dubai which is fast becoming one of the the shopping destinations for Europeans. Why? Simply because the exchange rate is currently in the favor of the foreign currency and prices are much lower than in the US or Europe. So what exactly does that mean? For example, this means that you can pick up designer clothes or accessories for nearly a hundred dollars less than you would spend here in the United States. Electronics are much the same and as a result, in addition to the domestic populations of these foreign countries, you'll see hundreds of Europeans (and some Americans) mixed in with arm loads of shopping. In Dubai, this fact, combined with the fact that the shopping is all duty tax free, means that everyone is nuts to shop.

But aside from shopping, this also helps illustrate a point for many which has been in the news in recent years, outsourcing. One doesn't realize how lucrative outsourcing truly is for companies until they see the value of the dollar in places such as India. The standard of living in India is high but even on what would be considered an entry level salary in the US, converted into rupees, it means that the person is earning much much more. For the sake of example let's say that an individual in India is being paid $20,000 per year to do work of an advanced programmer or some such duty. When multiplied by 40 (which is the exchange rate $1:40 rupees) means that that person is actually earning 800,000 rupees per year. Now this is a very simple example but it serves to illustrate why businesses find it appealing.

Combine this exchange factor with the fact that cost of some necessities is lower in India means that you can do quite well on a salary that would be just above minimum wage in this country. Don't believe me? My family and I were out shopping in India one afternoon and decided to grab a bite to eat. We had a pretty decent sized lunch with appetizer, drinks along with our meals and the bill came to a little less than $10 (once converted). If you can feed a family of four on $10 for one meal, imagine what you'll be able to do when you have $20,000. This is not to say that I think all jobs should be outsourced out of the country, but you see why it is so appealing to the larger corporations who are on board with the idea.

For those of us who come there for a few weeks a year to visit family and friends and shop, it is a chance to be a little more extravagant in our expenditures. For those of us in the business world, it is a chance to realize and understand why outsourcing is viable and works. Again, this is not to say that I am completely for the idea of outsourcing but I think it is a good way for corporations or agencies that do outsource, to increase their profits which is good for our economy overall. Amazing what you can figure out on vacation.



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