NRI remittances are unaffected,says RBI

Remittance inflows from overseas Indians increased to $43.5 billion during 2007-08 as compared to $30.8 billion in 2006-07. The RBI has estimated remittances of $18.02 billion during the April-September period of 2008. Private transfers continued to be around three per cent of India’s GDP since 1999-2000 and helped in offsetting India’s merchandise trade deficit to a large extent.

“Based on the information collected from regional offices of the Reserve Bank,it was observed that so far there was no slowdown in the inward remittances,” the RBI study said. As inward remittances depend upon the interest differential and the exchange rate movement,due to the rupee depreciation in the recent period,there has been a significant rise in inflows,particularly through the rupee denominated NRI accounts such as NRO and NR(E)RA schemes.

Furthermore,the hikes in the interest rate ceilings on NRI deposits since September 2008 to LIBOR/ Swap rate plus 100 basis points in case of FCNR(B) and LIBOR/Swap rate plus 175 basis points in case of NRE deposits have increased the interest differential in favour of India. This along with the weakness of the rupee vis-à-vis the US dollar,some of the remittances might have been attracted towards India which probably might have masked the adverse impact on inward remittances to India,it said.

Although there is no official data/information available on the job losses suffered by migrants residing in the Gulf countries,the findings of the RBI study revealed that there are no indications about workers from the Gulf region — where a large number of Indians are present — returning to India. “Further,informal discussions with some of the bankers in different states/region indicate that the banks do not have any authentic information on the issue and have not noted any trend in reverse migration,” said the RBI study on ‘Invisibles in India’s balance of payments’.

“There are also apprehensions about workers’ remittances and NRI flows to India slowing down as a consequence of global financial crisis and the recession in major advanced economies. There is a perception that the recession induced rising job losses in the US and Europe could fall more on migrants workers. Even if there is no lay-off,workers would often have to accept lower wages as employers worldwide are seeking to cut costs in an attempt to cope better with the financial crisis,” the RBI said.

Fears have also been expressed in several quarters about the reverse migration of Indian labourers working in the Gulf countries,which could result in a decline in remittances and NRI deposits in India. But the study admitted that the construction industry in the Gulf region,especially in the UAE,is facing a tough time due to the global meltdown and has left millions of construction workers with an uncertain future.