Indians in Qatar rush to take advantage of falling rupee

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Raju was desperate to see the entire QR 40,000 credited to his Indian bank account as he feared the exchange rate of the rupee vis-à-vis the Qatari riyal would begin looking up from its low of Rs17.30 early on August 19. He was over the moon after effecting the money transfer as he got a ‘dream’ exchange rate of Rs17.26 to a riyal. Today, on August 20, the rate sank even lower and stood at 17.47 at the time of writing.

Indian account

In just a week, his Indian bank account had swelled by a considerable Rs 675,000, a sum he had not been able to collectively remit in the past four years since he landed in Doha. Raju’s happiness knew no bounds as he would be able to see his younger sister married off when he visits India on vacation in December this very year.

Bank loans

Raju is not the only Indian expatriate who has taken a bank loan to remit funds home since the rupee began plunging against the dollar in recent weeks. Remittances to an already busy Indian sector began rising after the rupee touched an all-time low of Rs 16 to a riyal and beyond in recent weeks, sources in the local foreign exchange trade said.

The rupee has been taking unprecedented plunges against the dollar for reasons to be elaborated in this story later. And, since the riyal is pegged to the dollar at QR 3.64, the rupee is literally involved in a freefall against the Qatari currency as well. Banking industry sources said that among expatriate borrowers, Indians currently top the list in terms of numbers, if not loan value.

No wonder then, that the consumer credit dispensed by banks in June alone swelled by a massive QR 5.6 bn, according to Qatar Central Bank (QCB) figures for the month. Indians outnumber all other nationalities in Qatar and while official statistics are hard to come by, rough estimates suggest they may not be less than 600,000 of Qatar’s population. That is almost a third of Qatar’s entire population, so it is less surprising if India remains the largest recipient of overseas remittances from here year after year.

Transfer frenzy

The rupee’s fall has been triggering money transfers by Indians in Doha at a feverish pace, said foreign exchange operators. “In just about the past three weeks, the rupee has weakened more than 6 percent against the riyal,” an exchange official said. The rate was Rs16.16 per riyal at Al Dar Exchange in the Old Airport area on July 26, 2013, for instance.

Rupee volatility

Until the start of 2013, there were little signs of volatility of the Indian rupee, according to exchange operators active in the Indian sector. Having had a quick look at his computer records, an operator who said he was not authorised to give such details to media (note that this data is publicly available on the web), revealed that on January 31 this year, for instance, the rupee-riyal rate was Rs14.64. “You can thus see that in less than seven months, the Indian currency going solid and appreciating against the dollar, albeit on a balanced seesaw, has shed almost 20 percent of value.”

Much of this loss — about 15 to 16 percent — has come to the fore in the past three months. In simple terms, a severe shortage of the dollar in India for it to be able to pay for its imports that are much higher than its exports, is at the root of the problem, according to a Doha-based Indian financial expert.

Indian current account deficit

This problem, in more simplistic terms, is known as current account deficit. “The deficit is yawning because India must pay for its rising oil imports, but a bigger and avoidable challenge is huge gold imports. The Indian government has since been restricting gold imports as India remains the largest importer and user of this economically unproductive metal,” said the expert. The dollar shortage has been made worse by a near exodus of foreign funds from the Indian market.

“The problem began with the US markets improving. That led to a sudden flight of foreign capital from India,” said the expert. He added that although the Indian market is vast and resilient as the country’s foreign exchange reserves are at nearly USD 300 bn, enough to meet its import needs for months on end, the rupee could take a further dip, to Rs18.67 to a riyal, over the short to medium term. “I think we could see that rate within this year,” the expert said

Rebound doubtful

The expert said he did not think the rupee could bounce back to its 2012 levels or stabilise at the Rs 68 level versus the dollar (the August 19 rate was Rs 60.30, for instance) before the general elections in India that are due by mid-2014.

A falling rupee is pushing up consumer inflation in India. “It is close to double digits now, being over 9.5 percent,” an Indian banker told bqdoha.com over the phone. “I can predict that very tough times are ahead for the Congress-led government in New Delhi, as rising prices directly impact poor and middle-class voters. Despite all its wealth and talk of big money, the fact remains that ours is a poor country,” the banker said. Slackening economic growth, tipped by analysts to be finally at below five percent, could further aggravate the price situation, he warned.

Rush to remit

Back in Qatar, Indians are not only seeking bank loans, but those in trading, including in shadow businesses like neighbourhood stores, are withdrawing large sums to wire money home as the rupee maintains its freefall. “Given the trend, we hope total remittances to India from here may easily cross USD 5 bn by 2013-end,” a source in the remittance trade said.

It could be even more given the fact that much of the service and retail trade in Qatar is dominated by Indians, added sources. Unlike their middle-income and richer compatriots in cash-rich Qatar who are happy sending money home in a mad rush, low-income Indian workers face a dilemma. They must send more money to their dependents at home so they can fight the galloping inflation, while their incomes here remain stagnant.

“I must send QR 100 more to my family every month to help them meet rising household expenses and I do not know how I can manage,” said an Indian worker who claimed he earned QR1,400 a month working in a grocery store as a helper.

He and other Indians like him are at the other extreme of a community that seems so excited about the rupee’s fall, little aware that a tumbling currency is primarily a sign of an ailing economy — and a sure recipe for social disaster in a country plagued by ills like corruption and spiralling costs.

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