“Rupee down, utilise the opportunity.” This is the subject line of an e-mail message sent out to NRIs by a nationalised bank seeking deposits when the rupee slid to 58.50 against the dollar on Tuesday.
The message captures the essence of the impact of the free fall of the rupee on Indians living overseas, especially in the Gulf countries. “It’s good for us NRIs, but bad for our country’s economy,” said Abu Iringattiri, who works as an accountant in Saudi Arabia. Iringattiri told Business Line over the phone that most NRIs, mainly manual workers earning low wages in the Gulf, were happy about the rupee depreciation.
“For the few hundred riyals or dhirhams they send, their families back home get more rupees and hence they are happy.”
Remittances to NRE (non-resident external) accounts have been increasing in the past fortnight; but, in the last couple of days, there has been an upsurge.
The daily inflows from the Gulf almost doubled on Monday and Tuesday, banks in Kerala reported. Kerala is one of the largest recipients of foreign remittances, amounting to about a third of its GDP.
Salary cycle
A. Surendran, head of Federal Bank’s International and Retail Business, said the daily remittances had gone up to Rs 200-250 crore from the average Rs 125 crore earlier. Most of the remittances came from Saudi Arabia, UAE, Kuwait and Qatar. Remittances from the US and Europe had not shown much of a rise. He expects the inflow to rise for two or three more days.
The salary cycle in the Gulf normally starts on the seventh of every month and the inflows would last for a week, he pointed out. However, if the NRIs believe that the rupee value will hit Rs 60, they would hold back remittances, Surendran said.
A senior executive of State Bank of Travancore said the inflow this time was not as high as in May last year when the rupee value had suddenly dipped. At that time, NRIs had taken bank loans in their host countries to send money back home so that they could enjoy the value appreciation.
“Remittances to India by Indians living abroad will go up substantially this year,” said Prof Irudaya Rajan of the Centre for Development Studies, Thiruvananthapuram, who has been tracking NRI remittances and Gulf migration for several years now. According to the World Bank, India received the largest quantum of global remittance — $69 billion — in the world in 2012, pushing China to the second spot.
Irudaya Rajan said Kerala, whose economy was dependent on NRI remittances, had received around Rs 60,000 crore last financial year. This year, it might top Rs 65,000 crore.
“Every time there is a depreciation of the rupee, there is an immediate rise in the remittances, particularly from the Gulf,” K.K. George, Economist and Chairman of the Kochi-based Centre for Socio-Economic and Environmental Studies, pointed out.
Depreciation was good for the Kerala households, as nearly a third of them had at least one member earning abroad. He recalled that during 2003-07, when the rupee had appreciated against the dollar, Kerala households had lost heavily.
Meanwhile, banks are competing with one another to cash in on the free fall of the rupee by wooing NRIs to deposit with them.