NRIs Cheered as Indian Rupee Hits Two-Year Low Against U.S. Dollar
With the dollar surging against the Indian rupee, NRIs are taking advantage of the depreciating rupee by sending money to India. The surge in money sent to India increased to 48% in the first four months of this financial year –according to The Economic Times.
Non-Resident Indians are stashing away more to remit home in order to take advantage of the weakening rupee and the eight- to nine-percent interest rate on domestic deposit in India. Remittances are also fueling the real-estate market, as real-estate is viewed as long-term investment with a lifetime appreciation.
On the flip side, an appreciating U.S. currency is a worry to the manufacturing sector in India. Exports have become expensive eroding the margins of the sellers.
For the recipients of money sent by NRIs, remittances are a lifeline, and ‘dollars wrapped with care,’ according to Dilip Ratha, Head of KNOMAD (Global Knowledge Partnership on Migration and Development). Funds sent help pay for education, housing, care for the elderly and business investments. In some cases, remittances act as emergency funding for unforeseeable situations, when money is needed the most.
According to World Bank data, India received remittances worth US $70 billion in 2014 way ahead of China, Philippines and Brazil, and continues to grow as one of the top recipients of remittances among developing nations.
Remittances into India constitute almost 4% of India’s GDP. Money transfer from USA to India constituted almost 12billion dollars and is expected to grow to 15 -20 billion dollars by 2016.
This market has seen the emergence of Fintech disruptors like Transfast, Xoom and Remitly instrumental in reshaping the FX market and helped in lowering the cost of global remittance fee. Established players like Western Union and Moneygram are already feeling the heat from the online disruptors. With offerings like instant bank deposit, high exchange rates and zero fee transfers, these companies have significantly increased their share of remittance in the online market space.
As long as we see US dollar surge against the INR we will see a surge in money transfers to India, fueling businesses, changing lives and aiding in the growing economy.