Currency market experts are projecting that the rupee could reach levels beyond INR 84 against the US dollar in the near term, driven by a substantial increase in the dollar index and crude oil prices
The Indian rupee has once again experienced a decline, dropping below INR 83 against the US dollar. This has triggered expectations of a notable surge in remittances, particularly from non-resident Indians (NRIs) based in the Gulf region. Currency market experts are projecting that the rupee could reach levels beyond INR 84 against the US dollar in the near term, driven by a substantial increase in the dollar index and crude oil prices.
Financial experts note that when the exchange value of the Indian rupee falls against the US dollar and the UAE dirham (AED), NRI remittances to India tend to rise significantly. This is due to the fact that expats can maximize the value of their remittances by sending more dollars or dirhams for each unit of their home currency. The exchange rate between the rupee, USD, and AED are closely linked, as the UAE currency is pegged to the US dollar.
NRIs in the Gulf region contribute significantly to the overall expat remittances to India. In 2022, India received remittances totaling $100 billion from overseas Indians, marking a 12 percent increase within a single year
In the context of the upcoming Onam festival, which is a major celebration in the state of Kerala, many banks in the region are expecting a substantial uptick in remittances. Kerala has a significant population of expat Indians working in Gulf countries. The timing of the rupee’s decline coinciding with the festival season is expected to encourage NRIs to send larger amounts of money back home.
“We anticipate a noteworthy increase in expat remittances, particularly from the Gulf region, in the coming days. The current depreciation of the rupee offers NRIs an opportunity to send higher amounts than they might have originally planned,” revealed a senior official from a private bank in Kerala, who preferred to remain anonymous.
Onam, the state’s largest festival, falls on August 29th, and its celebrations typically span the entire month. The rupee’s recent decline saw it dropping 29 paise to a 12-month low of 83.12 against the US dollar on Monday. This decline is attributed to a robust US dollar overseas and firm crude oil prices in international markets.
Historically, a declining rupee has been linked to an increase in remittances from NRIs, particularly those in the Middle East. NRIs in the Gulf region contribute significantly to the overall expat remittances to India. In 2022, India received remittances totaling $100 billion from overseas Indians, marking a 12 percent increase within a single year.
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