The Indian rupee slumped to Rs16.65 against the UAE dirham (Rs61.18 vs USD) in intra-day trade on Monday, a whisker short of its six-month low of Rs16.72 as the Indian currency witnessed its biggest single-day decline in six weeks.
Fluctuations in the exchange rate matter for expatriates since a favourable rate (weakness in currency of destination) means that they are able to remit more money to their dear ones back home, or simply more savings and investments in their home country.
The recent weakness in the Indian rupee and a host of other expat currencies, including the Pakistani rupee and the Philippines peso, is good news for millions of foreign workers in the UAE – as well as several more millions who live and work in other GCC countries with dollar-denominated currencies, as well as those in the US and Canada.
In addition, the dollar strength and the resultant rupee weakness comes just in time for Indian expats as the festive season is in full gear.
With the south Indian festival of Onam barely over, the upcoming Eid Al Adha in a couple of weeks will be followed by the festival of Diwali, and a favourable exchange rate means that expats will be sending home more money than usual.
This is confirmed by data shared by Xpress Money with Emirates 24|7, according to which remittances have surged by 15 per cent over the past few weeks.
“Yes, we have seen a rise of 15 per cent in remittances in the last few weeks,” Sudhesh Giriyan, Vice-President and Business Head, Xpress Money, told Emirates 24|7. “Typically, this time of the year, remittance volumes are high because of the ongoing festive season,” adds the official of Xpress Money, an instant remittance agency.
His views are echoed by Promoth Manghat, Vice-President, Global Operations at the Abu Dhabi-based UAE Exchange, one of the world’s largest remittance companies with an extensive network in the Middle East and Asia.
“Remittances to India have been growing steadily over the past couple of weeks due to the onset of festive season in India. Added to this was the weakening of the rupee recently, which further spiked the money flow,” says Manghat.
“Being the biggest receiver of remittances from across the globe due to its huge migrant population, India has always been experiencing high volume of money flowing into the economy, every year,” he adds.
Indeed, in 2013, India received a whopping $70 billion (Dh257bn) in remittances from its countrymen working overseas, with remittances from the UAE (almost $15bn) topping the charts, followed by those from the US (more than $10bn) and Saudi Arabia (almost $8bn), according to a World Bank report.
In addition, 2013 data from Al Ansari Exchange, another remittance house based in the UAE, showed that UAE expatriates remitted nearly Dh130bn in 2013, with Indians and other South Asians dominating the charts.
Around 80 per cent of the total remittances were made by individuals while the rest were in the form of corporate transfers, the exchange said, adding that India received the largest dose of remittances from the GCC.
The country has been receiving an increasing amount of money from its overseas workers, and experts maintain that the final few months of the year see a surge in remittances. “The trend of higher remittances begins with Ramadan and continued for Eid and the Kerala harvest festival, Onam. This trend is expected to continue during the second half of the year with festivals like Eid, Diwali and Christmas round the corner,” said Xpress Money’s Giriyan.
Price alone, he says, isn’t the only factor driving remittances to India. “At this time of the year, better prices alone may not be the driving force of the rise in remittances as the festive demand will keep transactions buoyant,” says Giriyan.
“With the rupee falling, we are sure there will be added push to remittances. What we have noticed is that during times of rupee depreciation, it is the big-ticket remitters who take advantage of the situation and it may not necessarily be from regular blue-collar remitters who form a big chunk of the remitter community in the UAE,” he explains.
“The weakening of Indian rupee has been one of the many reasons behind the increase in remittances to India,” concurs UAE Exchange’s Manghat. “Along with this, there are various promotions by money transfer service providers, which offer exciting prizes to the customers.
"At UAE Exchange, we conduct the 'Onasowbhagyam' promotion for the Malayali community during Onam festival. The promotion is currently on. During Ramadan too, we conducted our popular promotion Money Majlis. The growth in remittances can be also attributed to the festive season, during which people send more money home to pep up the celebrations,” he adds.
That isn’t to say that a weak rupee doesn’t help. “It cannot be ruled out that even regular remitters will try and make use of the opportune situation since they get higher amount of Indian currency at the receiving end for the same ticket size they send regularly,” says Giriyan.
“Ever since the rupee has been trading on a depreciation band of Rs16-17 to AED1, there are remitters who keep a watch on the situation, shoring up funds waiting for an opportune time of lowest possible exchange rate to remit to India. The rupee fall will be taken advantage by these remitters. These funds usually are not for family maintenance and will be targeted at investments into India across real estate, stock market and other growth verticals,” he adds.
So what are the projections for the rest of the year in terms of UAE remittances compared to earlier this year? “The second half of the year is full of festivities and celebrations in India and the remittances are usually on a higher side during this period as compared to the first half,” says Manghat.
“Various community specific promotions offering exciting prizes are usually planned during important festivals of the respective communities. We are expecting the remittances to increase at a steady pace in the coming months,” he adds. “We expect a further growth in remittances in 2014 considering we see a healthy buoyancy in the second half,” maintains Giriyan.
Indeed, according to an earlier Migration Development Brief by World Bank, non-resident Indians may remit up to $85 billion a year by 2015.
Follow Emirates 24|7 on Google News.