'I believe there is a strong parallel here from which Indian companies -- especially, though not solely, the IT firms -- can learn some important lessons. If Indian companies compete mainly on cost arbitrage, they will find that as their costs rise because of the stronger rupee, they will increasingly become less profitable,' Singh said.

Singh admitted that it is also true that as the rupee appreciates, net margins at some companies erode more than at other firms and therefore, specifically, if Indian IT companies compete as low-cost providers of IT services, their competitive advantage will erode in a regime of a strong rupee.

He admitted that while the details of the two industries are quite different, the Japanese automobile industry can suggest some answers.

'Consider what leading Japanese firms like Toyota did as the yen strengthened against the dollar. For product lines where they made the highest margins, such as the Lexus, they continued production in Japan. However, for lower-priced models -- where their profit margins were lower and would have been eroded further by the rising yen -- they moved production to the US. They protected their margins on non-premium products by moving production -- and therefore shifting costs -- into dollar-denominated areas,' Singh said.

'They also reduced their vulnerability to further appreciation of the yen,' Singh added.

Singh argued that Indian companies should take a similar approach in response to this recent rising rupee regime and need to consider how to adapt their business models.

'To the extent that they compete primarily on cost arbitrage, the rising rupee will work against them.'

Image: Workers at Japan's auto giant Toyota Motors assemble the Lexus. When the yes rose against the dollar, Toyota kept product lines where they made the highest margins, such as the Lexus, in Japan. However, for lower-priced models -- where their profit margins were lower -- they moved production to the US.