A construction site in Dubai
New Delhi, Feb. 26: P. Selvan wanted to renovate his house back home in Coimbatore for Rs 2 lakh ahead of his sisters wedding next month. Now, he suddenly finds he needs more dinars to spend the same amount in India all because the rupee has risen.
Selvan, a plumber in Bahrain, is one of the 4.5 million overseas Indians, most of them in the Gulf, who have watched their savings melt because the rupee has been appreciating against the dollar and most other major world currencies.
The losses occur because foreign currency earned abroad fetches a smaller sum back home when the rupee rises.
Selvan, for instance, needs a few hundred dinars more to ensure that he gets the Rs 2 lakh he wanted to spend on the house. I planned the renovation a year back. Now I need to pay more to just match the amount.
A dinar was worth Rs 117 in January 2007, around the time the renovation was planned. Now, it is Rs 105.69. This means Selvan has to shell out 147 dinars more so he can get Rs 2 lakh.
In 2002, when Selvan had gone to Bahrain, a dinar fetched Rs 128.02. He would have then paid over 300 dinars less to get the same amount. Experts and bankers say the rupee has risen 14 per cent against currencies of the Gulf/West Asia in the past year, slicing through the pockets of Indian workers.
Already battling the spiralling cost of living in these countries, they are now having to combat the currency blow to keep sending their folks back home the same amount they had been remitting.
The pinch is being felt the most in Kerala, Tamil Nadu, Andhra Pradesh and Punjab, which are home to a majority of these workers. Those with jobs in Europe and the US also feel the bite but, being skilled workers and relatively well paid, they can cope better with the currency swings.
Remittances from overseas Indians are $10-12 billion annually. According to a study by K.C. Zacharia and S. Irudaya Rajan of the Centre for Development Studies in Thiruvananthapuram, there are 19.44 lakh workers from Kerala abroad, nearly 89 per cent of them in the Gulf. They had sent home Rs 24,525 crore (over $4 billion) last year, 33 per cent of the all-India figure of $12 billion.
Considering Keralas high dependence on remittances, the appreciation of the rupee will have an adverse impact on the states economy, said B.A. Prakash, head of the department of economics at Kerala University.
Kerala chief minister V.S. Achuthanandan has taken up the matter with the Centre, but a senior state official said she wasnt sure how much could be done. Since it (the rupee rise and its repercussions on workers abroad) is not a Kerala-specific issue, we cannot help much. But the state has taken the issue to the Centre, said Sheela Thomas, the principal secretary in charge of the NRI department in the state government.
Bankers say the amount of money sent home (remittances) is falling. Most overseas workers cut living costs to beat the rupee appreciation and send money home. But their savings are falling, said Abraham Thariyan, general manager (treasury) of the Alwaye-based Federal Bank, which has around 4 lakh NRI accounts.
Others point to the Gulf wages that havent gone up in years, triggering strikes by workers demanding hikes. Living costs have gone up, not salaries. Thats why you hear about strikes in Gulf countries, said K.K. George, who heads the Centre for Socio-Economic Studies in Kochi.
But Girijesh Pantt of the Centre for West Asian & African Studies at Jawaharlal Nehru University in Delhi sees signs of change. The Gulf Co-operation Council (a regional grouping) is slowly integrating into the world organisations such as the WTO. So, my hunch is that they may go in for some marginal hikes in wages.