Mumbai: Rakesh, a resident of Mumbai when he is ashore, is a captain with a global shipping line (he asked that his second name not be used). Over the past few months, he has seen his salary drop. “I got about Rs25,000 less last month than what I did in January,” he said.
Rakesh can blame that on the rupee. He earns his salary in US dollars (he is paid $7000 a month, or about Rs2,87,000). The rupee has gained 8.5% against the dollar since January, meaning that the rupee equivalent of his salary has come down. And over the past 12 months, Indian residents earning their salary in dollars have effectively taken a 10% cut in pay—they still have to spend their salary in rupees and the rupee has appreciated 10.16% against the dollar over the past year.
It is unlikely that anyone who earns in dollars feels the pinch of the currency’s depreciation because most people in this segment are, like Rakesh, fairly well paid. Even a monthly salary of $2,000, translates into around Rs82,000; in contrast, India’s per capita GDP is only around Rs35,000.
“Shipping is a global industry. Salaries are fixed as per their contracts and not based on where the ship is registered or where the shipping line is based. Therefore, the appreciation or depreciation of the dollar to their home currency has to be dealt with by each individual,” said Rajat Dutta, general manager, Great Eastern Shipping Co. Ltd. According to industry body Indian National Shipowners Association, an estimated 52,000 Indian seafarers working on foreign ships may be facing the same problem as Rakesh’s.
Some companies do have clauses that deal with currency fluctuation in their employment contracts, but most do not, and the employee has to bear the entire risk. Some executives in the aviation, retail, hospitality and information technology sectors who earn their salary in dollars have also been affected. A few five-star hotels have foreign chefs who are compensated in dollars.
In some cases, the employee’s loss turns out of be the employer’s gain. “We have many expatriates working in the senior management level with dollar salaries. Clearly, the rupee’s appreciation is impacting us positively,” said Ajay Singh, director at no-frills airline SpiceJet. Such employees are paid in dollars—in which case the company has to buy dollars—or the rupee equivalent of dollar salaries.
Apart from employees in specific sectors and individuals working in diplomatic missions, embassies, or UN agencies, most foreigners working in India won’t feel the pinch of the rupee’s rise. That is because most multinationals and large Indian firms have moved to a system where most of their foreign employees based in India are paid in rupees. South African Andrew Levermore, CEO of Hypercity Retail (India) Ltd, the K. Raheja Group-promoted hypermarket chain, said he was not affected because he was paid in rupees.