Repatriating the profits back to US and its impact on the Indian Rupee

I am not really convinced that repatriating profits from external territories will help spur the US economy.

To understand the matter more clearly, we can probably just keep aside the repatriation issue and ask the CEO's of the companies that plan to bring back the profits just one question, "Do you plan to invest in USA or in the Pacific and Latin Emerging Markets for future growth of your firm?". If the answer is not to invest in USA(which is what most of the CEO's are doing), then the tax break that the Fed has recently announced (taxing only 5.85% on repatriated profits from 30% previously) will not serve as carrots for the horses.

The only advantage is that if the US companies plan to divert their money from one international location to another. This is where the rules become a bit tricky and it might not be as easy to move the capital, lets say from India to China. Thus the money brought back to USA may help to navigate the capital liquidity movement.

Initially I was of the opinion that the Indian Rupee would depreciate in 2006 due to this tax relief provision of the US Fed, since the temporary relief in the repatriation of profits may cause at least a good amount of the estimated $320 billion(Need to figure out how much of this amount is spread between China, India and other emerging markets) to flow back into the US and thus impacting the Indian Forex. But I would not bet on that, as I see most of the US Multinationals in India(Software Sector) have embarked on a growth curve and hence would take advantage of the Tax "Deferral" scheme of USA Tax system and defer all their taxes, which will be ploughed back in the same country for future growth.

Some up tick in Forex activity will definitely happen in some pockets of year 2006. Especially when the US companies that are well established in India and China, such as Procter&Gamble, Johnson&Johnson, which have been making great profits for many years, decide to bring back a part of that profits . These US multinationals are out of the embryonic stage and on to self sustained growth curve, hence might not want to hold back their profits and will definitely want to keep the money close to their heart(USA).

Finally, those who plan to send money to India or China, just hang on, you may get better exchange rate in 2006, when the companies start to repatriate.

Swanson's Unwritten Rules of Management

Business 2.0 has provided in a nutshell about Swanson's Unwritten Rules of Management also known as "The CEO's Secret Handbook". It's a wonderful reading and a must for any professional, not necessarily a management professional.

Here is another rule, which I think is worth every word in gold. Not sure where I picked it up from.

Motivation is what gets you started.
Habit is what keeps you going.