Dubai: Money exchange houses in Dubai are expecting a spike in remittances from the UAE to India as the rupee’s value against the dollar has recently fallen to its lowest since mid- December 2014.
The Indian currency dropped 0.9 per cent on Monday, closing at 62.9175 a dollar, the biggest depreciation since December 16.
“This is the biggest decline since December last year,” noted Sudhesh Giriyan, COO of Xpress Money.
As of Wednesday morning, exchange houses in Dubai were offering around 17 rupees per one dirham sent to India, still higher than last week’s rates, which were hovering a little over 16 rupees.
It may be too early to tell whether the high-income non-resident Indians (NRIs) in the UAE are going to cash in on the low rupee, but Ghiriyan said there has been a surge in enquiries this week regarding the current exchange rates.
Unlike the unskilled or semi-skilled employees who work in labour-intensive sectors like the construction industry, most white-collar expatriates in the UAE don’t send money to India on a monthly basis.
However, when they do open up their wallets, they tend to pump large amounts of money back to their home country.
“These guys are probably just waiting for a good rupee rate to come up. The rupee started sliding only yesterday but there are already indications that [a spike in remittances is going to happen soon]. We’ve noticed more customers already calling to ask about the current rates and what’s going to be the trend,” Giriyan said.
Ashwin Shetty, senior vice president, treasury, at UAE Exchange, said he has seen remittances between the UAE and India spiked by 50 to 80 per cent "during the days of rupee depreciation.".
"The advantage of a lower rupee is mainly taken by high-ticket remitters which form some one per cent of the total population of remitters to India. Nearly 50 per cent of the total volume of remittances when the rupee depreciates come from them and the funds are sent for investment purposes in real estate, fixed deposits and other instruments which have high return potential."
According to World Bank statistics, India was the top recipient of remittances in 2014. Indians from around the world sent a total of $70 billion to their home country. In comparison, China received $64 billion and the Philippines $28 billion.
Overall, remittances reached $853 billion last year, which is more than double the Official Development Assistance (ODA), which includes loans and grants that seek to promote economic development and welfare in certain countries.
Officials have said that the money being sent by expatriates can have a positive impact not just on the personal finances of the migrant workers and their families, but also on the economy of the receiving countries.
“With new thinking, these mega flows can be leveraged to finance development and infrastructure projects,” said Kaushik Basu, World Bank chief economist and senior vice president.
“India [as well as Israel] have shown how macro liquidity crises can be managed by tapping into the wealth of diaspora communities. Mexicans migrants have boosted the construction sector. Tajikistan manages to nearly double its consumption by using remittance money. Migrants and remittances are clearly major players in today’s global economy.”