Rupee nosedive boosts NRI remittance power

Rupee nosedive boosts NRI remittance power Issac John / 21 June 2013 The Indian rupee plunged to an all-time low against a dollar-pegged UAE currency on Thursday, giving Non-Resident Indians a big boon as their remittance power rose sharply by Rs1.6 per dirham in weeks. The rupee fell as low as 59.97 against the dollar, down from its Wednesday close of 58.72 and a May average of 54.9. The dramatic fall was triggered by global investors who pulled out of emerging markets and the US signalled it could start scaling back on its monetary stimulus that has injected billions of dollars into the global financial system. Foreign institutional investors have pulled around $3.75 billion from Indian stocks and bonds in June, according to the Securities and Exchange Board of India. A falling rupee may bring cheers to NRIs but makes life all the more difficult for residents back home by stoking inflation. The rupee has now fallen more than 10 per cent since the start of May, making it one of the worst performing major currencies in Asia. The rupee’s sharp decline also sent Indian stocks and bonds tumbling on Thursday. Indian shares posted their biggest single-day decline in nearly 21 months. Y. Sudhir Kumar Shetty , chief operating officer, Global Operations, UAE Exchange, said the scarcity of the dollar in the market, due to the control on dollar flow, had brought the rupee to its all-time low. “The Indian economy has been going through a tough phase for sometime now. This new development has only added to the woes of the nation’s economy,” said Shetty. “Remittance volume to India, which is already the largest receiver in the world, has definitely gone up.  Indian expatriates are exploring every avenue to send as much money as possible,” said Shetty. He predicted that the rupee would continue to be under pressure for some time to come, and its future depends on what measures India would take. Sajith Kumar P.K, director and CEO of IBMC Group & JRG International, said the increase in current account deficit and fiscal deficit is the major domestic factor against the rupee. He said some new steps taken by the India Government could slowly stop further fall of rupee.  “However, a massive sell off by foreign institutional investors remains a major threat at present.  If US dollar further strengthens, the rupee may touch 60 to 61 per dollar,” said Kumar. Adeeb Ahamed , CEO, LuLu International Exchange, said the volume of rupee remittance had marginally gone up. “We have seen an increase of 10-12 per cent in the volume of remittance and number of walk-ins over the last fortnight. Expats have resorted to borrowing funds from the financial institutions to avail the benefit of rupee fall.”  “The depreciating rupee is not the finest news for the domestic market but for NRIs it provides a good opportunity to park their spare funds in India now,” said Alok Anchan , an executive at Rajesh LifeSpaces, a Mumbai-based developer. “Temporary rupee depreciation has made property investments cheaper by over 25 per cent for NRIs over the last 12 months,” said Nishant Singhal , director, Strategy and International Operations at Investors Clinic. Taylor Scott International