Indians feel the pinch as rupee hits 6-month high

While India basks in the glory of Commonwealth Games and a rapidly growing economy, Indian expatriates in the Gulf and, indeed, across the world are a worried lot.

The rupee is currently trading at Dh11.96 to Dh1, with the Indian currency reaching a six-month high against the US dollar yesterday at $1 to Rs44.3851, it's strongest showing since April this year.

The UAE dirham (which is pegged to the US dollar) has weakened almost 15 per cent against the rupee since it touched a high of Dh1 to Rs14.25 in March last year, and is currently trading at Dh1 to less than Rs12, although it remains well above the 2007 low of Dh1 to Rs10.65.

Saddled with additional burden of having to spend more dirhams to remit the same amount of local currency every month, the impact of exchange rate loss is particularly heavy on individuals who have loan instalments to settle or regular bills to pay in their home countries.

"The Indian rupee is becoming stronger and this has been happening for the past 10 days or so. Due to a weaker dirham versus the rupee, people are holding back and transferring less money back to India," said the head of UAE Exchange branch in Al Barsha.

Abhimanyu Chauhan, a salesperson with a leading IT retailer in Dubai, said he was worried about the strengthening of the rupee. "When I decided to come here, I did my calculations based on the then exchange rate in 2008, when things were a lot different. Today, the exchange rate looks much different and I have had to control my expenses here to make sure that I keep servicing my mortgage instalments back home," he said ruefully.

"I check the rate on a daily basis to make sure that I remit money at the best possible rate, but of late it's been declining steadily," he added.

"They [Indian expatriates] are observing the rate carefully," agrees the UAE Exchange official. "It's very difficult to say where the Indian rupee will go from here as there are many factors involved. The strong performance of the Indian stock market may make the rupee even stronger," he said.

A steadily strengthening rupee is not welcome news for the millions of Indian expatriates, especially those in the lower income group in the UAE and other countries in the region whose currencies are linked to the dollar.

For long, Indians abroad have remitted a large proportion of foreign currency to their home country, boosting India's foreign exchange reserves from $9.8b in March 1993 to $292b in the week ended September 24, 2010.

With nearly 5.5 million non-resident Indian (NRIs) living in the Middle East, they outnumber the combined Indian populations of the US (2.2 million) and the UK (1.5 million).

Remittance by Middle Eastern NRIs forms a substantial part of the Indian reserves. Gulf expats - largely from the working and middle classes - sent some $27.5b of remittances back home to their families this past year alone, according to the Reserve Bank of India, the country's central bank.
 

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