Rupee low sparks rush to send cash home for Indian workers
Indian expatriates are rushing to send money home after the rupee slumped to a record low against the dollar.
The Indian currency has fallen by about 10 per cent this year alone, a significant drop compared with recent years, according to experts.
Although in dirhams their wages remain the same, a worker is able to send 10 per cent more rupees compared with last year.
The latest drop coincidesd with a payday weekend, which has provided an extra boost to those flocking to money exchange centres to send cash to their families at home.
The lowest mark of 70.66 to the dollar was on Wednesday – prompting expatriates to take advantage. The rupee traded at 19.3 to the dirham on Thursday.
For hotel manager Faisal Jurani, the currency dip was an opportunity to gain more rupees for the dirhams he has saved for his retirement in India.
“I have been watching the rupee fall and now is the time for me to finally send the money home that I have been saving up,” Mr Jurani said.
“This is part of my retirement plan, so I look for chances like now when I can get more rupees for the dirham.”
Electrician Ahmed Rahba, who usually sends home Dh700 every month, said because of the favourable exchange rate he sent about 1,000 rupees (Dh52) more to his family in India.
“My wife and children depend on me to send money at the end of every month for school and daily expenses. It’s just lucky for me that it has happened now so I get an advantage.”
Money exchanges in the UAE were expecting a strong flow of remittances. While the surge in remittances coincided with thousands of blue-collar workers sending money home at the end of the month, experts also expected other expatriates to remit large amounts.
“Whether the rupee is appreciating or depreciating, a large number of labourers have to send money on a particular day every month because of family commitments. When the rupee weakens they get more rupees for their dirham and they are happy about it,” said UAE Exchange president Sudhir Kumar Shetty. “But remittances spike when the middle and upper income groups wait for an opportune time to send money. They are rushing to remit. The increase in volume that we see is from mid and upper-class segments who remit to invest in shares, deposits and other funds. Their remittance is not periodical or every month – they wait for an opportune time. This dip in the rupee is what is encouraging large remittances.”
The rupee’s fall this year is substantial compared with a depreciation of about 4 per cent on average in the past 10 years, he said.
“This is an all-time low for the rupee that is under pressure because of increased oil prices, a balance of payment problem because India’s import bills are going up because of higher oil prices and a fiscal deficit because the government expenditure is more than the revenue,” he said. “With elections around the corner, emerging-markets funds are also withdrawing and these factors are pushing the rupee southward.”
Business leaders think the rupee will continue to weaken.
“The business community will continue to look at economic parameters because the rupee has not yet touched its lowest point and it is felt that it will depreciate further,” said Sudesh Aggarwal, chairman of the India Trade and Exhibition Centre.
Despite further anticipated fluctuations, waiting was not an option for Mr Rahba.
“I have heard people say I will get more benefit if I wait, but I don’t have that luxury. The extra money this month is a big advantage to pay loans I have.”
India’s central bank said almost all currency notes scrapped two years ago are back in the banking system, raising questions about the point of controversial attempts to tackle illegal money.
The economy suffered after Prime Minister Narendra Modi stunned the country in November 2016 by withdrawing 86 per cent of banknotes from circulation in a move known as demonetisation.
He said the decision to scrap all 1,000-rupee and 500-rupee notes was necessary to clean up India’s corrupt economy, suggesting hoards of undeclared wealth – “black money” – would be unearthed.
The state set a deadline for the banknotes to be deposited in accounts or exchanged for new tender, which it said would leave people hiding large sums of illegal cash with a difficult decision: either declare it and face possible criminal action or do nothing, rendering it worthless.
The Reserve Bank of India said on Wednesday it completed its assessment of demonetisation and found that 15.3 trillion rupees’ (Dh791 billion) worth – or 99.3 per cent – of the devalued bills had been returned. The RBI gave no explanation for what that meant for the success of the policy.
Analysts and opposition politicians said it proved Indians were not hoarding undeclared or counterfeit notes at home.
They argue illegal money is hidden through so-called “benami” transactions, where assets such as properties are registered in false or thirdparty names, which the cash ban did nothing to combat.
“The report shows that demonetisation has failed in its primary objective,” said Ashutosh Datar, an economist in Mumbai.
Indians are heavily dependent on cash. About 90 per cent of everyday transactions were carried out in cash at the time of the ban.
Critics say demonetisation caused unnecessary suffering to millions of India’s poor who operate outside the formal economy, and the IMF this month said the policy caused “an acute monetary shock”.
India’s economy grew 7.5 per cent in the quarter preceding Mr Modi’s announcement, but growth fell as low as 5.7 per cent in mid-2017 as it reeled from demonetisation and other economic reforms, including the introduction of a goods and services tax.
Although 5.7 per cent growth is impressive by the standard of western economies, analysts say Asia’s third-largest economy should be expanding at about 8 per cent.