Abu Dhabi: Remittances to India is expected to go up as Indian rupee crashes to an all-time low of 69 against the US dollar but the latest development is not expected to have a much impact on the prices of goods sold in grocery stores or super markets.
In early trading yesterday, rupee fell to an all-time low of 69 against the US dollar driven by a number of factors including higher oil prices and heightened geopolitical tensions due to escalation of trade disputes between the US, China and the EU, which risks turning into a full blown trade war.
The rupee’s last record low was 68.8650 per dollar on November 24, 2016.
Oil prices have surged in recent months due to tightening of global markets following Opec agreement to cut production to about 1.8 million barrels per day to support oil prices and geopolitical tensions between the US and Iran over the country’s controversial nuclear enrichment programme.
The United States this week demanded that all countries halt imports of Iranian oil from November, in a move that is likely to hit Iran’s economy and its ability to fund oil projects to produce more oil to supply into the global oil markets.
Brent, the global benchmark, was trading at $78.07 per barrel, up by 0.58 per cent at around 2.34 PM UAE time.
“India is a net importer of oil and higher oil prices is likely to undermine the country’s current account deficit and fuel inflation,” Ehsan Khoman, Head of Mena Research and Strategist at MUFG Bank, told Gulf News.
He also said a weakening currency will bolster India’s export competitiveness but will leave importers feeling the heat. “The cost of debt servicing will rise for corporates which have high foreign borrowings,” he added.
The latest scenario is not going to have a much impact on the price of goods sold in the UAE’s supermarkets or grocery stores. A lot of Indian products are sold in the supermarkets including rice, lentils, flour, fruits and some other food stuff.
“A lot of food stuff is bought months in advance to sell in the markets so the latest crash will not have much impact on the price of goods,” said a trading source.
Advantage
Money exchange houses, on the other hand, are bullish about money transfers going up due to weakening of the Indian rupee.
“Whenever the Indian rupee depreciates against the dollar, people always take advantage and send more money to India. For people who send money on a monthly basis, it is definitely a situation where they can get more money with the same amount of dirhams,” Promoth Manghat, chief executive officer of UAE Exchange, told Gulf News over phone.
“We also expect a surge from high-ticket remitters, especially those who repatriate their investments and savings to India.”
Remittance volumes have surged in recent months after oil prices increased and rupee came under pressure against the dollar and the recent trade turmoil between different countries compounded it, he said.
Positive sentiment
“The strengthening of the dollar is not only good for Indian rupee but also for Pakistani rupee and Philippine peso. There is also a positive sentiment across the UAE due to various announcements by the UAE government related to long term visa, full foreign ownership, among others that has been supporting remittances.”
Rate against dirham
Yesterday, the Indian rupee hit an all-time low touching 18.80 against the UAE dirham. The previous lowest was 18.74 against the UAE dirham in November 2016.
Adeeb Ahmad, managing director of LuLu Financial Group, asked expats to make use of this considerable fall and plan their investments or savings accordingly.
“Those looking to send out large volume transfer can gain further, as we expect the rupee to depreciate further. However, such currency fluctuations do not affect regular remitters, and they will continue sending money for family maintenance.”
Emerging currencies take a hit
With a rising dollar and intensifying trade tensions between the world’s two largest economies, emerging currencies took a battering this week as investors fled to safe haven assets, including the greenback.
The Iranian rial began the last seven days at 42,260 rials to the dollar. By yesterday, it had recovered slight to 42,373 rials. The Turkish lira, meanwhile, dropped from 4.7 lira at the end of last week, to 4.5 lira to the dollar by the end of this week. The Egyptian pound hit a high of 17.89 pounds to the dollar on June 22, and had recovered to 17.95 pounds by yesterday.
The impact
Syed Safdar, 45, Sales, Supervisor
“This is a good time to make remittances and invest back home. Falling rupee could be good for non-resident Indians, but, it’s definitely not a time to celebrate. The rupee in a free fall doesn’t bode well for the economy and I hope the government takes corrective measures to stabilise the economy.”
Neelesh Bhatia, 48, Businessman
“Many people are struggling to save enough money under the current economic situation and this is a good opportunity for those to send some extra money back home as the rates are better. It is also a good opportunity for those who are looking to make an investment in India. Currency fluctuation keeps happening and not much should be read into this. Indian economy is going strong and it is not based on just one aspect.”
John Varghese, 56, contract manager in Abu Dhabi
“For a long term it’s not good for the Indians because a handful of people reside overseas, while a majority suffer back home because of the rising cost of living in India. It’s good that temporarily we benefit from the attractive exchange rates but our families back home pay higher prices for commodities and services. Each month I remit money to India, even I took the personal loan to invest in India.”
Manoj Vasudevan, 39, purchasing manager in Abu Dhabi
“Exchange rates are good nowadays and even best today, so I plan to remit the money back home in couple of days since I received my salary today. Our salaries remain stagnant so any appreciation to our savings in terms of currency exchanges are good for us.” He hoped that economic situation of India will soon bounce back, “which is more important for us”.
