Falling rupee: Do NRIs really gain?

Falling rupee: Do NRIs really gain?
By GOPAL SUTAR
Published: Sep 24, 2011 23:03 Updated: Sep 24, 2011 23:03
BANGALORE: Contrary to the rising stock market, a falling Indian currency sends a sense of fear in the Indian economy. The rupee recorded its sharpest fall in a single day in 15 years on Sept. 22, closing at a 28-month low at 49.58 against the US dollar.
However, such a decline augurs well for all those who send their money to India. Nearly 30 percent out of $55 billion transferred by the Indians to their home country in 2010 was from the Gulf.
At present, most expatriates earning outside the country seem happy with the declining rupee. With the festive season fast approaching and possibility of rupee weakening further, more remittances are bound to be made.
“No one would like to miss the opportunity to get that extra money”, says a banking official in Bangalore, India’s IT hub. The Indian rupee has lost more than 9 percent against the Greenback this year alone. One Saudi riyal now fetches over Rs. 13.
Indian experts blame it on euro zone crisis, which has weakened the euro resulting in a stronger dollar.
The dollar demand is on the rise in India ever since the government relaxed the overseas borrowing limit in July this year. It is alleged that some companies are hoarding dollars even by paying premium and this has created a demand-supply crisis. Once the rupee breached the 49 level, the Reserve Bank of India (RBI) intervened but could not stop the slide.
All this is bad news for Indian economy even as Indian expatriates rejoice.
NRIs may have more money in their hands, but investors and their families in India do not gain much.
India is a net borrower of the dollar. The declining currency acts as fuel for inflation. The petrol prices in India are amongst the highest in the world at current exchange rates. The bulk of India’s crude requirement — nearly 70 percent — is imported by paying cash in dollar terms.
The weak rupee also means India has to cough up more for raw materials needed for manufacturing activities, which have slowed down in the past few months.
When India pays more for its import, the fiscal deficit widens. As it is, the country has been struggling to overcome the deficit menace for years despite slew of measures announced by its Finance Minister from time to time. The government is facing severe criticism for its fiscal profligacy.
With a few exceptions such as the IT sector and pharmaceuticals to a certain degree, the declining rupee has hit India’s large private sector companies including Reliance Industries Ltd., blue-chip public sector organizations such as Indian Oil, Hindustan Petroleum, metal industries and real estate companies.
Ultimately, everything gets passed on to the consumer and therefore in real terms the NRIs may not benefit to the extent they believe.
However, due to the falling rupee their earnings or salaries get automatically hiked in cash terms compared to resident Indians who might have to wait for long for any increase in their income.
http://arabnews.com/economy/article506261.ece

Reserve Bank of India binds NRIs and their relatives

Reserve Bank of India binds NRIs and their relatives
By GOPAL SUTAR
Published: Sep 20, 2011 02:57 Updated: Sep 20, 2011 02:57
BANGALORE: The Reserve Bank of India (RBI) has made a few changes in the Foreign Exchange Management Act (FEMA) to boost more cooperation between NRIs and their relatives.
The central bank has now allowed the relatives of non-resident Indians to bear the medical expenses of visiting NRI relatives.
The resident Indians have also been given permission to repay loans availed from banks in Indian rupees in India by their NRI relatives.
As per another notification, NRIs can also hold joint accounts with their Indian resident relatives.
This applies to Foreign Currency Non-Resident (FCNR) account and Non-Resident External (NRE) Rupee account.
Resident individuals are permitted to make gift in rupees to close NRI relatives.
The amount must be transferred by check or by electronic means.
The amount should be credited to the Non-Resident (Ordinary) Rupee Account (NRO) account of the NRI.
The gift amount needs to be within the overall limit of $200,000 per financial year as permitted under the Liberalized Remittance Scheme (LRS) for a resident individual.
It would be the responsibility of the resident donor to ensure that the gift amount being remitted is under the LRS and all the remittances under the LRS during the financial year including the gift amount do not exceed the limit prescribed.
According to the bank notifications, the necessary amendments related to FEMA are being carried out separately.
http://arabnews.com/economy/article503843.ece