Dubai: For the nearly five million Indians staying in the Gulf region, the lure of making fast bucks has vanished, thanks to the rising cost of living and fall in the value of local currencies.
The Gulf countries, a major source of NRI remittances to India, have been experiencing unprecedented growth in the cost of living on the one hand and a steep decline in exchange rates due to most Gulf currencies’ peg to the dollar.
Indians in the UAE have lost about 12% of their earnings due to exchange rate variations and nearly 10% is lost in the increased cost of living, according to the ‘Gulf News´.
Weak dollar and low interest rates
NRI deposits, which account for a major share of India’s forex reserves, are on a declining spree due to the weakening dollar, lower interest rates and the Gulf’s rising cost of living.
“Saving potential of an average Indian working in the Gulf has come down by more than 30% during the past two years. Although many of them are remitting the same amount or more in dollars, the reduced exchange rates of Gulf currencies are directly hitting their saving potential,” said Sudhir Shetty, general manager of the UAE Exchange Centre.
However, with falling exchange rates, people’s saving potential has come down. That is reflected in declining bank deposits, he added.
“While falling rates and the interest rate cap on foreign currency deposits are the main reasons attributed to the decline, people have also started diverting funds to other investment options like real estate and the stock market,” another banker said.