In the face of it, there is nothing common between Naseer Mohammed from Malappuram, Thomas Cherian from Chengannur and Haridas Nair from Kollam. Except that they work in the three major hubs of GCC countries—Dubai, Riyadh and Jeddah.
They also break their back to support their families, who, however, do not subscribe to the merits of physical labour and hence turn to migrant labour from other parts of India to get done even the most menial tasks. Naseer, Thomas and Hari are a part of the 16 lakh non-resident Keralite workforce that managed to aggregate remittances worth `75,000 crore that flowed into their home state in 2013. Given the statistics that they contributed almost 20 per cent of the total NRI remittances upwards of Rs 4,00,000 crore, reinforcing their sway over the state’s economy.
The web of happy tales woven by its repatriate community, especially the NRKs, look poised to see new, perhaps unhappy twists as the bull run of foreign remittances may soon start losing steam. Unfortunately, for all the wrong reasons. A stifled flow of foreign remittances could be the price that the country will have to pay for setting its economy in order and ensuring greater fiscal discipline, leading to a rupee that starts making significant gains against the US dollar. Yes, if India starts flexing its economic muscle, resulting in the emergence of a stronger rupee, then many NRIs, led by the strong contingent of NRKs whose remittances accounted for 18 per cent of remittance flow into the country, may well look at other saving options.
The argument is simple. If the rupee, having already crept up to Rs 59 from Rs 60-plus, were to strengthen to Rs 55 and then over the remaining months in 2014 to edge towards Rs 50 before coming to rest at what now looks improbable, but definitely not impossible — Rs 45 to the US dollar — then the likes of Naseer, Thomas and Hari can’t be blamed if they reach the conclusion that any remittances to their homeland would translate to a 25 per cent slashing of the wages they earn in the Middle-East.
Ideally, the bullish mood in the Indian equity market, under-scored by a vote of confidence by FIIs, would lead to the assumption that we are in for another year of surge in foreign remittances into our coffers. And, in sync with the history of such deposits, that Kerala would lead this rally.
The punters, at least in Kerala, may not be in a hurry to take bets on this scenario as that would be a simplistic prediction of the way NRI remittances would behave in the remaining months of 2014 as also the next year or two. Because, by and large, the NRKs have rarely reposed faith in the stock market, even the ongoing bull run not proving a serious lure. Instead, they continue to park their hard-earned petro dollar in the banks, alternating fixed deposits between the homegrown and nationalised ones. Provided there are sufficient reserves after constructing the mandatory palatial buildings which will remain unoccupied 50 weeks a year and buying flashy gold ornaments that straightaway go into lockers, only to come out at times of financial crisis which soon follow as surety for gold loans.
Confides an entrenched player in the country’s financial markets, with his roots in Kerala: “It has been a fact that whenever the Indian economy has done well and by extension the rupee, the remittances by NRKs have always shrunk. I don’t foresee a different scenario unfolding this time either. In short, India may well be on a growth path under the new political regime, but the average NRK, who has always found his home state a safe haven for parking funds, will now start getting worried about an unfavourable clime looming in the forex market.”
That is, unless there is a silent revolution in the minds of lakhs of NRKs and they start thinking beyond the traditional investment options. Surely, the fund managers would be licking their lips as they ready themselves with a menu that offers mutual funds, pension plans and insurance packages.