Rupee depreciation led to higher NRI remittances, says ASSOCHAM

A sharp decline in the rupee value in the last one year resulted in a surge in the NRI remittances in the fiscal 2011-12 and going forward, these inflows will only improve in the current financial year, an ASSOCHAM study said. The main source however, was from NRIs investing in real estate sector in India compared to investing in government bonds or other investment options available for them.

The rupee depreciation, to the extent of about 25 per cent in the last one year, has had a positive impact on the remittances by the non-resident Indians (NRIs), making up more than the negative impact that could have been seen on these inflows because of severe slowdown in the western economies, the study said.

India received US dollar 66 billion in the FY 2011-12 on account of remittances by Indians abroad, showing a surge of 19 per cent over the inflows in 2010-11. Going forward, even though the rupee may not see as much depreciation as it did in the last 12 months, the remittances would remain robust and may well cross US dollar 75 billion in 2012-13, the chamber study indicated.
“There are two reasons why the NRIs would continue to send funds back home. One, expensive dollar results in better yields for them when the foreign currency gets translated into the Indian currency and second, the liquidity in the western markets are likely to improve. This, in turn, would find way into India as well, also through the remittances route along with the foreign institutional investors,” it said

Commenting on the issue,  ASSOCHAM President Rajkumar N Dhoot said “ a robust repatriation of money by the Indians abroad prove a great support for India’s current account deficit, which otherwise remains a matter of concern in view of continuous and worrisome deceleration in exports of merchandise goods”.
  The current account deficit in the fiscal 2012-13 is projected to be 3.6-3.7 per cent of the Gross Domestic Product. India received NRI remittances of US dollar 56 billion in 2010-11 and US dollar 54 billion in the fiscal 2009-10.

According to   RBI data, North America, the Gulf countries and Europe are the major sources of the repatriation of money from Indians abroad. Though there is a big chunk of emigrants to the Gulf countries, the funds from North America, including Canada, are greater because of different profiles and income level of Indians employed and engaged in these regions.

ASSOCHAM’s optimism in terms of better NRI receipts also stems from the  fact when the going gets tough in the developed economies, the Indians there tend to save more and would like to park their surpluses in their home country.

However, the remittances from Europe are very likely to come under pressure as the wage levels and the rate of unemployment increases in the troubled area, especially in the Eurozone, excepting Germany.

The situation in North America would not change much, excepting that Indians would tend to save more while the Gulf the demand for Indian labour force would remain stable, the ASSOCHAM study said.