Indians living in the Gulf have sent record sums of money home in remittances, taking advantage of the rupee's plummet against the dollar.
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Measured against the Reserve Bank of India's reference rate, the rupee fell by nearly 13 per cent from 44 to the dollar on August 1to 49.7 to the dollar on September 23.
The UAE's Indian population alone yielded about US$60 million (Dh220.3m) in August and September, according to data from Indian asset management companies based in UAE. Market observers said the continuing rupee decline had created a good money-making opportunity for many. There are reports that many non-resident Indians (NRIs) have resorted even to borrowing to boost their remittances.
"Remittances into India from the Gulf region might have gone up as much as 60 per cent since August," said Krishnan Ramachandran, the chief executive of Barjeel Geojit Securities. "Indians are taking low-interest loans from Gulf-based banks and sending the money to their country. They make a clean profit doing so,"
Investors have been borrowing money from Gulf-based banks at 5 to 6 per cent and sending the money back home to get better returns.
"These are investors who typically borrow in offshore jurisdictions where dollar-denominated debt, along with forward cover and related costs, are available at about 5 to 6 per cent. The differential yield on such borrowings are thus quite attractive to such investors," Mr Ramachandran said.
But the effect is not immediate. "This does not necessarily mean that all these remittances translate into investments immediately," he said. "A large portion typically will go into bank deposits, followed by investments into domestic mutual funds, equities, etc."
The rupee has fallen because of the financial crisis in Europe, rising oil prices and India's current-account deficit. Inflation hitting 9 per cent for the 10th straight month in September also caused further uncertainty in the currency.
Indians are worrying about equity markets and are careful about investing in stocks, market makers said. Global equity markets are experiencing a crisis of confidence, and the Indian market is suffering from the same volatility that is occurring all over the world, leading NRIs to shy away from equities.
"The sentiments of the average investor is to wait and watch for some semblance of stability in the markets," Mr Ramachandran said. "The next two to three months will be crucial for the markets and they will determine the way forward for the coming year." But he warned that borrowing at any cost madelittle sense.
"Borrowing costs from Gulf-based banks are at about 10 to 11 per cent at present, and unless the end investment yields returns over 12 to 14 per cent, such borrowings are going to be counterproductive. This is not being realised by many, and they resort to borrowing to remit monies back home. Many of them also tend to withdraw cash using their credit card cash limits, which is at a huge cost." The increase in remittances has not gone unnoticed by the State Bank of India (SBI), which is set to launch a range of services for NRIs in the UAE.
"These services include opening of NRI accounts," said Debajyoti Ray Chaudhuri, the newly appointed chief executive of SBI's Dubai International Financial Centre operations, according to Indian media reports. "The bank would retain its focus on corporate products, trade finance and consolidate its operations from the Dubai International Finance Centre."
The Indian central bank also said recently it was relaxing some of its foreign exchange restrictions for NRIs to offer more freedom with transactions.
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Generation Start-up: Awok company profile
Started: 2013
Founder: Ulugbek Yuldashev
Sector: e-commerce
Size: 600 plus
Stage: still in talks with VCs
Principal Investors: self-financed by founder
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COMPANY PROFILE
Name: Almnssa
Started: August 2020
Founder: Areej Selmi
Based: Gaza
Sectors: Internet, e-commerce
Investments: Grants/private funding
The specs: 2018 Jaguar E-Pace First Edition
Price, base / as tested: Dh186,480 / Dh252,735
Engine: 2.0-litre four-cylinder
Power: 246hp @ 5,500rpm
Torque: 365Nm @ 1,200rpm
Transmission: Nine-speed automatic
Fuel consumption, combined: 7.7L / 100km
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Specs
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How to protect yourself when air quality drops
Install an air filter in your home.
Close your windows and turn on the AC.
Shower or bath after being outside.
Wear a face mask.
Stay indoors when conditions are particularly poor.
If driving, turn your engine off when stationary.
The British in India: Three Centuries of Ambition and Experience
by David Gilmour
Allen Lane
COMPANY%20PROFILE
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If you go
Flight connections to Ulaanbaatar are available through a variety of hubs, including Seoul and Beijing, with airlines including Mongolian Airlines and Korean Air. While some nationalities, such as Americans, don’t need a tourist visa for Mongolia, others, including UAE citizens, can obtain a visa on arrival, while others including UK citizens, need to obtain a visa in advance. Contact the Mongolian Embassy in the UAE for more information.
Nomadic Road offers expedition-style trips to Mongolia in January and August, and other destinations during most other months. Its nine-day August 2020 Mongolia trip will cost from $5,250 per person based on two sharing, including airport transfers, two nights’ hotel accommodation in Ulaanbaatar, vehicle rental, fuel, third party vehicle liability insurance, the services of a guide and support team, accommodation, food and entrance fees; nomadicroad.com
A fully guided three-day, two-night itinerary at Three Camel Lodge costs from $2,420 per person based on two sharing, including airport transfers, accommodation, meals and excursions including the Yol Valley and Flaming Cliffs. A return internal flight from Ulaanbaatar to Dalanzadgad costs $300 per person and the flight takes 90 minutes each way; threecamellodge.com
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COMPANY PROFILE
Name: HyperSpace
Started: 2020
Founders: Alexander Heller, Rama Allen and Desi Gonzalez
Based: Dubai, UAE
Sector: Entertainment
Number of staff: 210
Investment raised: $75 million from investors including Galaxy Interactive, Riyadh Season, Sega Ventures and Apis Venture Partners
Tips from the expert
Dobromir Radichkov, chief data officer at dubizzle and Bayut, offers a few tips for UAE residents looking to earn some cash from pre-loved items.
- Sellers should focus on providing high-quality used goods at attractive prices to buyers.
- It’s important to use clear and appealing photos, with catchy titles and detailed descriptions to capture the attention of prospective buyers.
- Try to advertise a realistic price to attract buyers looking for good deals, especially in the current environment where consumers are significantly more price-sensitive.
- Be creative and look around your home for valuable items that you no longer need but might be useful to others.
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The specs
Engine: 1.5-litre turbo
Power: 181hp
Torque: 230Nm
Transmission: 6-speed automatic
Starting price: Dh79,000
On sale: Now
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The Melbourne Mercer Global Pension Index
The Melbourne Mercer Global Pension Index
Mazen Abukhater, principal and actuary at global consultancy Mercer, Middle East, says the company’s Melbourne Mercer Global Pension Index - which benchmarks 34 pension schemes across the globe to assess their adequacy, sustainability and integrity - included Saudi Arabia for the first time this year to offer a glimpse into the region.
The index highlighted fundamental issues for all 34 countries, such as a rapid ageing population and a low growth / low interest environment putting pressure on expected returns. It also highlighted the increasing popularity around the world of defined contribution schemes.
“Average life expectancy has been increasing by about three years every 10 years. Someone born in 1947 is expected to live until 85 whereas someone born in 2007 is expected to live to 103,” Mr Abukhater told the Mena Pensions Conference.
“Are our systems equipped to handle these kind of life expectancies in the future? If so many people retire at 60, they are going to be in retirement for 43 years – so we need to adapt our retirement age to our changing life expectancy.”
Saudi Arabia came in the middle of Mercer’s ranking with a score of 58.9. The report said the country's index could be raised by improving the minimum level of support for the poorest aged individuals and increasing the labour force participation rate at older ages as life expectancies rise.
Mr Abukhater said the challenges of an ageing population, increased life expectancy and some individuals relying solely on their government for financial support in their retirement years will put the system under strain.
“To relieve that pressure, governments need to consider whether it is time to switch to a defined contribution scheme so that individuals can supplement their own future with the help of government support,” he said.
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The specs
Engine: Direct injection 4-cylinder 1.4-litre
Power: 150hp
Torque: 250Nm
Price: From Dh139,000
On sale: Now
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The specs
Engine: 2.0-litre 4-cylinder turbo
Power: 240hp at 5,500rpm
Torque: 390Nm at 3,000rpm
Transmission: eight-speed auto
Price: from Dh122,745
On sale: now
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SPECS
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Director: Todd Phillips
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