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Rupee fall: Indian expats hold onto savings

Muaz Shabandri / 24 August 2013

Indian expatriates in the UAE are still holding onto savings, with the Indian rupee expected to fall further over the next few weeks.

Dr TP Ghosh, an Indian professor of accounting and finance at the Institute of Management Technology (IMT) in Dubai said the currency would further lose its value against the dollar, in line with financial projections by major banks.

He told Khaleej Times it was still too early to send money home.

“India continues to face problems on multiple fronts. In dirham terms, I believe the currency could reach up to 18.75 rupees per dirham.”

However, he warned the current slide of the rupee would not necessarily mean more savings for expats.

“It is not exactly correct to say we are saving more money. The monetary savings won’t give us the same value Indian currency previously had. It is very temporary to cheer about extra money. When you go back to India, you would be using the money and the cost of services would increase as inflation has already started picking up again.”

The widening Current Account Deficit (CAD) and increasing cost of subsidies are expected to push the Indian rupee further as a Deutsche Bank report projected the Indian rupee could crash to 70 against the US dollar in a month. It is currently about 64 to 1.

The Indian government has already undertaken a number of corrective measures and some expatriates have expressed surprise at new laws aimed at curbing the import of flat screen TV-panels and an increase in taxes on gold imports. India’s finance minister has said the decision could only be reversed once the currency regained stability.

“For the time being, it is the right decision. We have to pay more taxes and the government should impose further restrictions on imports. When the country doesn’t have precious foreign exchange, it should make every attempt at cutting down expenditure in foreign currency,” added Dr Ghosh.

Indian expats in the UAE have keenly watched currency prices to take advantage of every drop. Kay Kay, the managing director of Radial Trading Centre which imports and exports automotive aftermarket goods in the UAE, called for the need to stabilise the “turbulent” Indian currency as soon as possible.

“It is a temporary benefit and I believe the rupee would return to normalcy soon. For UAE-based exporters who send products to India, the volatility in currency is not a good sign. It is a breeze and turbulence at the same time,” he said.

He added the rupee’s rapid decline could sometimes inadvertently cause losses to UAE-based exporters who support business-dealings on credit.

“It may be good news for working professionals but the business community does not support volatility. As a trader, I have already adjusted prices for products exported to India. Sometimes we also include a clause to protect the seller from fluctuations in currency prices and maintain transparency,” he added.

Other expats also hoped the currency would stabilise over the next few weeks. Nishat Khatib, an Indian expat working in Dubai expressed optimism.

“For most of us who have already sent some money back home, we would want it to stabilise now. I myself invest with Indian banks through fixed deposits and it is important for me to keep myself updated with currency prices.”

She said the Indian economy was in a better state than other economies in the world.

“It really can’t get much worse from here.”

Khatib also called on the need to reassess taxes imposed on gold imports by NRIs. “The gold taxes are unrealistic and needs to be reworked.”

muaz@khaleejtimes.com

 

 

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