NRIs undecided whether to remit now or later

Dubai: The Indian rupee’s taken a further hit by dropping below 72 to the dollar on Monday, going against market expectations that the currency would actually start improving its position this week. That optimism was brought on by a series of measures the Indian finance minister had announced late last week to try and jump start the economy.

But Adeeb Ahamad, Managing Director at Lulu Financial Group, reckons the pressure on the rupee is unlikely to abate. “We feel the rupee can extend its weakness to 72.80… before reversing the trend to some extent.”

That is in a best-case scenario. But if the “trade war and Brexit concerns are still lingering and the situation gets worse, the rupee can test 73.50 in another month.”

Send back now… or later?

It is this uncertainty that expat Indians in the UAE and Gulf will have to factor in when thinking of remittances. Should they do so now, when the dirham fetches 19.58 rupees, or should they chance it and hope the rupee will slip further?

Much depends on how far the Indian government can go in trying to turn around the economy. Growth rates have dropped, stocks remain under pressure, and there are reports of key sectors such as automotive and even consumer goods bearing the brunt of it.

On October 11 last year, the rupee had dropped 20.20 to the dirham, when the trade war between the US and China was picking up steam and concerns started being expressed about the “real” growth rates of the Indian economy.

Plus, “The hike in the surcharge on income tax on earnings of “foreign portfolio investors” was a matter of worry,” said Ahamad. “On account of this, FPIs pulled out more than 30 billion rupees from the Indian capital markets during the month.” The surcharge was announced last month’s federal budget.

“However, the Finance Minister Nirmala Sitharaman on Friday has hinted at a rollback of the surcharge along with other necessary measures to arrest the decline in the stock markets.” (The real estate markettoo would be exposed to such incentives, expected to be revealed shortly.)

Again, the question is whether these booster announcements would work to revive the economy. And if they do, how long will it take?

Until there are such signs, the rupee and the pressure on it will continue. Plus, there is always the Donald Trump-China issue playing out. “Since Trump is adamant in his stand on tariffs, most of the countries are compelled to devalue their currencies (against the dollar) to safeguard the interests of exporters,” Ahamad added.