Rupee slide delights Indian expats

The sudden drop in the value of Indian rupee may be a cause of alarm for economic experts but it is delightful news for the expat community in the Kingdom and other Gulf countries.
The rupee hit a new record low against the dollar yesterday at 59.98 in late afternoon trade, well below its previous record of 58.98 last week. One Saudi riyal was fetching almost Rs. 16 while it was trading at Rs. 16.32 against the UAE dirham yesterday.
According to currency dealers, the rupee — the worst performing Asian currency in 2013 — has fallen 8.7 percent so far this year, followed by the Korean won and the Philippine peso.
The Reserve Bank of India (RBI) is believed to have intervened twice during the day, each time the rupee came close to the 60 level, AFP quoting dealers reported.
Asif Iqbal, an Indian expat, said: “We have seen many fluctuations of the rupee in the past, but did not gain significantly. In the short term, we may gain something but ultimately in the long run, we will suffer in India.”
He pointed out that a weaker currency will indirectly fuel inflation, which is already high, because imports will be costlier.
Another Indian working in the Kingdom for the last 23 years said expats don’t get to enjoy the benefit of the official exchange rate as banks charge their own rates, which in some cases are quite different. “Weekend market closures also make a difference. There can be marked difference in the rate on a Thursday morning (when you cannot remit funds from the Kingdom) and on Saturday morning (when you can),” he said.
Azhar Syed of KSB Pumps Arabia Ltd. said with the rupee weakening back home, Indian expats in the Kingdom were witnessing higher returns since they remit money to India.
“We are paying less here in riyals in exchange for the rupees we send home in India now as compared to a few months back,” said Syed.
He, however, cautioned that the falling rupee will have an adverse impact in India because imports will be expensive which leads to higher inflation.
The exchange rate of rupee now stands at $ 59.93 to a dollar, which is 00.95 more than last week, says S.M.H. Akbar, a mediaperson.  But “more” in such cases always turns out to be “less” because what one used to pay for a certain amount or kind of commodity or service, will now cost more if the transaction is in rupees.
Abhishek Goenka, chairman of advisory firm India Forex, believes that the rupee may be entering a “new territory.” “The common man has nowhere to go since he remains in the same territory of high prices. As I often say, life these days is cheap, but living is expensive,” Akbar said.
“We don’t know much about the negative impact of such a crash of our currency,” says Dammam-based Ismail Ali Khan. “What we know for a fact is that this is fetching us a windfall in the form of good exchange rates. We have never had such a fabulous rate,” he said.
Some expatriates, like Riyadh-based accountant Shaikh Moinuddin, have been holding on to their riyals in the hope of a further crash. “Ever since the Indian economy started showing signs of slowdown, I knew the rupee will go down, and that is exactly what has happened,” Moinuddin said, adding: “Now is the time for me to rush to the bank to convert my riyals into rupees.”
Commenting on slide of the Indian rupee, Jarmo T. Kotilaine, a regional economist, said: “The rupee, of course, has been under pressure due to factors that are specific to India. The performance of the economy has weakened and inflation remains a source of concern, albeit less than in the past. The somewhat diminished inflationary pressures have in turn created room for monetary easing which has reduced the interest rate differential vis-a-vis other countries.
“The downward pressure on the rupee may persist for some time, although I would not expect any further significant weakening.”
Kotilaine said that for Indian expats, a weaker rupee will create incentives to repatriate savings and acquire assets in India which are now cheaper in dollar terms. In the short-term, this would tend to boost remittances, barring tactical delays linked to expectations of further depreciation.
“For India, a weaker rupee should boost the competitiveness of exports while attracting foreign tourists. Imports, however, will be expensive and further perpetuate some of the inflationary pressures we have,” Kotilaine said.
John Sfakianakis, chief investment strategist at Masic in Saudi Arabia, said: "It's hard to tell where the Indian rupee is going from here but its recent depreciation has taken many by surprise. Since the start of 2012, there has been net inflows into stocks and debt of about $ 47 billion, which has helped fund the current account deficit and prevent the rupee from falling even further.”
However, in recent months, he said the reform process has sputtered, taking some of the shine off India for investors. If the current account deficit rises and net foreign inflows decline, then the rupee could depreciate further.
“Indian expats can benefit as long as the currency they hold remains stronger vis-a-vis the rupee which means that their purchasing power is higher when they remit money back to India. Of course, if inflation rises in India some of the benefits of a stronger remitting currency would be eaten away. A depreciating rupee will increase the cost of imports, especially oil, and make Indian exports more expensive,” Sfakianakis said.
Recently, the Reserve Bank of India kept interest rates on hold which was a prudent decision. The central bank’s main concern is the growth rate as also the inflation scenario. It is likely that they will wait for clarity on the direction in which the current account and inflation moves, which depends on the currency and global factors, he said.