Why Should Employees Suffer Because of Currency Fluctuations?
While big Indian firms, which registered profits during the last quarter deny that rupee appreciation is affecting their margins, small ones curse such fluctuations for their declining profits. For instance, the impact of this can be seen on NIIT Technologies’ profit margins — that stood at only 5 percent for the last quarter. When I met the company’s CEO recently, he said, “While the effect of sub-prime mortgage problem has been nil on our profit margins, the rupee appreciation has affected our profits on a big scale.”
But when I asked a couple of biggies about the same, many just laughed (God knows why?) and ignored the questions by giving some vague answers (like “oh, we don’t see such effects on our company!” and “It’s affecting the small ones only.”) while many just didn’t want to talk on this topic.
The bottomline is: The companies that are registering profits claim that they do not see any impact of currency fluctuations while the ones that post losses are finding an easy escape and simply blaming it on such fluctuations.
At a time, when the fluctuating values of dollar and rupee are forcing many small- and mid-sized Indian firms to fire their employees, the big Indian firms (with few exceptions) have decided to put a stop on their hiring plans. To fulfill the customers’ demands, they want the existing employees to work over time. In fact many have stopped, temporarily, giving offs on Saturdays. Huh!!! This is also on employees’ head.
“But why should we suffer,” asked a software engineer who works for one of India’s biggest software firms.
Currency fluctuation is very important while talking about offshoring. The exchange rate INR/GBP was 0.01170 on 03 Nov. 2006 and 0.01218 on 03 Nov. 2007.
Let’s now imagine a British company outsourcing their operations to India. Let’s assume the the salaries in India increased by 9% during this year. However, for this British company the real increase is the nominal increase plus the currency effects – 13% in this case…
That’s why companies started to report about the impact of the curency fluctuations on their financials a few years ago.