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July 8, 2013 4:40 pm
Money transfers to India from its expatriates in the Gulf are surging as the rupee tumbles against the US dollar, in a dramatic sign of the Arabian Peninsula’s ever-growing importance in global migrant worker financial flows.
Indian nationals have been sending back earnings to cash in on the peg many Gulf currencies have to the dollar, foreign exchange companies say, with wealthy individuals seeking to exploit investment opportunities in property and the stock market.
If sustained, the rush to repatriate could account for billions of extra dollars, as Indians in the Arabian Peninsula region account for a good portion of the estimated $70bn remitted home by Indians worldwide.
“We never had such a sharp fall in the history of the Indian rupee,” said Sudhir Kumar Shetty, chief operating officer of UAE Exchange, one of the biggest money transfer companies in the United Arab Emirates. “It was a free ride.”
Mr Shetty said remittances from Indian expatriates processed by his company had grown between 10 and 12 per cent over the past six weeks to two months, driven by wealthier individuals sending home sums of between $5,000 and $100,000 a time. Many were investing the cash in India to take advantage of the fall of more than 9.5 per cent during the year to date in the rupee against the dollar, which is pegged to the UAE dirham. The rupee hit another record low on Monday, dragged down by soaring demand for gold imports, an unsustainable current account deficit, and the US decision to reduce its economic stimulus programme.
Anecdotal evidence suggests Indians in other Gulf countries are also repatriating significantly more money, including from Saudi Arabia, the regional giant. “So many many people are sending money to India to start businesses or to build homes,” said Navas Liya, a messenger at a shipping company in Riyadh. “Everybody sends their salary once they get it, now I can’t borrow money from my friends because they do not keep any.”
Indians form the largest expatriate group in the UAE and other Gulf countries, working in jobs ranging from taxi driving to top executive posts. Some have spent decades in a region a relatively short hop across the Arabian Sea from home, building successful businesses and significant wealth.
Everybody sends their salary once they get it, now I can’t borrow money from my friends because they do not keep any
- Navas Liya, messenger at a Riyadh shipping company
While the rupee’s fall against the dollar has been one of the most dramatic by a big economy currency this year, the US currency’s strength has also created opportunities for other expatriates in the Gulf – including westerners. British employees paid in Gulf currencies have been cashing in on the troubles of sterling, which has fallen more than 8 per cent against the dollar during the year to date.
A basket of other currencies from the home countries of Asian Gulf expatriate workers – including the Sri Lankan rupee, the Pakistani rupee and the Philippine peso – have fallen between 2.3 per cent and 6.2 per cent against the dollar.
“People have been taking advantage of the depreciation,” said P. Krishnamurthy, chief executive officer of Dubai International Securities and the former head of Al-Rostamani International Exchange, who said total remittances for the second quarter of this year were up about 20 per cent year on year. “This is the general experience in the Asian corridor.”
But there are downsides to the Gulf expatriate currency bonanza, including that inflation back home – a problem in India – could erode part or all of the foreign exchange gain. Most of all, as with past similar windfalls, a currency trend now working strongly in favour of Gulf expatriates could easily go into reverse.
Additional reporting by Abeer Allam
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