Text size:

  • Small
  • Normal
  • Large
An Indian fishmonger counts her rupee notes at a market in Varanasi. The rupee has plumbed new lows against the dollar.
An Indian fishmonger counts her rupee notes at a market in Varanasi. The rupee has plumbed new lows against the dollar.

Wealthy families feel the pain of rupee slump

Education and travel costs particular concerns as affluent Indians are forced to rein in spending. Suryatapa Bhattacharya reports from New Delhi

NEW DELHI // Purabi Shridhar is ready for some belt-tightening measures as the rupee continues to slide.

The currency hit an all-time low against the US dollar yesterday, dropping almost 17 per cent since May amid fears that India's economic growth is stalling.

For affluent Indians such as Mrs Shridhar, the rupee's slump is affecting the way they educate their children, travel and invest their money.

Her daughter, Shrutika, 19, moved to Singapore last year to study psychology at university. With her daughter returning to New Delhi every three months, Mrs Sridhar now spends hours searching for cheaper fares since the currency crisis pushed up the cost of a direct return flight from New Delhi to Singapore by 10,000 rupees (Dh573) compared with last year.

"The expenses surrounding the education have skyrocketed but you can't withdraw your child from school and have her come back," she said. "There will be a tightening of belts."

As the rupee slides, it drives up the prices of everything from onions (at 80 rupees a kilo, up by half from last month) to electronic goods, most of which are imported.

"Right now, you have to think twice about everything you took for granted earlier. The ramifications are everywhere," Mrs Shridhar said.

"This means cancelled holidays abroad, or people will reduce the duration of their stay, or they will halve their shopping budgets," said Iqbal Mulla, the president of the Travel Agents Association of India.

"India's population was quite ready to travel until now but this is obviously a great setback for outbound tourism."

In recent years between 15 million and 18 million Indians have taken holidays abroad each year, he said.

"You will not see the changes immediately but in the coming year, it will set in," he added. "There will be consequences felt across businesses in India because of this."

The depreciating rupee, which fell to 64.55 against the US dollar, before closing at 64.11 yesterday, will also affect those making payments on property abroad, moreso if it is under construction, said Neeraj Bansal, the head of real estate and construction analysis with KPMG in India.

Controls were put in place last week by the government to arrest the slide, including a ban on purchases of property abroad.

To further discourage funds leaving the country, the central bank reduced the amount of money a person can send abroad each year from $200,000 (Dh735,000) to $75,000.

It also nudged up interest rates and limited the ability of banks to lend in an effort to make the rupee more scarce and therefore more valuable. These efforts have failed and the rupee continues to fall as investors appear more concerned with the slow rate of growth, and the bank's seeming preference for defending the rupee rather than encouraging economic growth.

Mr Bansal said many Indians were interested in buying property abroad, especially in the GCC, but such plans would have to be put on hold.

"This is true for the affluent class, those who are looking to invest in a third or fourth property," he said. "With outflow of cash no longer permissible, one can only hope to borrow from an overseas bank, but to what extent is that going to be possible for most people?"

But Sudhir Shah, an immigration lawyer in Mumbai, said Indians would find a way around making investments abroad.

"If you want to buy a property in Dubai, you can get your friends there or in Singapore or Zurich to invest and then you will find ways to pay them back," he said. "How you will pay them back may not be legal. This the government does not understand. These policies will not help."

China has similar caps, he said, allowing only $50,000 to be sent abroad by a person each year. "If they want to invest half a million dollars in the US to get a green card, a family's members rally together," he said. "The Indians will do it similarly here. They will just have to get more family members involved."

Over the weekend, the prime minister, Manmohan Singh, tried to allay fears that India was facing a currency crisis similar to the one in 1991, which forced India to open up its economy under Mr Singh, who was the finance minister.

The liberalisation had a positive impact. Foreign companies rushed to invest in India, and the economy grew at about 8 per cent between 2004 and 2011 when dividends from opening up the economy started paying off. Now the economy is growing at 5 per cent, the lowest in a decade.

Mr Singh said foreign currency reserves in 1991 covered the country's borrowing needs for just 15 days, while the current reserves were enough for six to seven months.

"So there is no comparison. And no question of going back to the 1991 crisis," he said.

Not everyone is convinced. Mr Shah said he had watched the rupee weaken for the past two years. At this time last year, the rupee stood at 55.48, compared with May 2011, when the exchange rate was 46 to the dollar.

Mr Shah's clients often invest abroad to obtain a green card in the United States, or permanent residency in other countries, including the Caribbean islands of St Kitts and Nevis, which have a citizenship-for-cash programme to lure affluent Indians into tax havens.

"It is more realistic now to make peace with the fact that the rupee is going to slide much further, to almost 75 rupees to the dollar, and stay there," Mr Shah said. "And that is the advice I am giving my clients."


twitter: For breaking news from the Gulf, the Middle East and around the globe follow The National World. Follow us

Back to the top

More articles

Editor's Picks

 Iranian President Hassan Rouhani greets supporters after his arrival in Zahedan, the regional capital of Sistan and Baluchestan province on Tuesday, April 15, 2014. During Mr Rouhani's two-day visit, he will tour several other cities and hold meetings with local scholars and entrepreneurs. Maryam Rahmanian for The National

On the road with Hassan Rouhani

Iran's president is touring some of Iran's most underdeveloped provinces. Foreign correspondent Yeganeh Salehi is traveling with him.

 The Doha-based Youssef Al Qaradawi speaks to the crowd as he leads Friday prayers in Tahrir Square in Cairo, Egypt in February, 2011. The outspoken pro-Muslim Brotherhood imam has been critical of the UAE’s policies toward Islamist groups, adding to friction between Qatar and other GCC states. Khalil Hamra / AP Photo

Brotherhood imam skips Doha sermon, but more needed for GCC to reconcile

That Youssef Al Qaradawi did not speak raises hopes that the spat involving Qatar and the UAE, Saudi Arabia and Bahrain might be slowly moving towards a resolution.

 Twitter photo of  Abdel Fattah El Sisi on the campaign trail on March 30. Photo courtesy-Twitter/@SisiCampaign

El Sisi rides a bicycle, kicks off social media storm

The photos and video created a huge buzz across social media networks, possibly a marker of a new era for Egypt.

 An Afghan election commission worker carries a ballot box at a vote counting centre in Jalalabad on April 6. A roadside bomb hit a truck carrying full ballot boxes in northern Afghanistan, killing three people a day after the country voted for a successor to President Hamid Karzai. Eight boxes of votes were destroyed in the blast, which came as the three leading candidates voiced concerns about possible fraud. Noorullah Shirzada / AFP Photo

Two pressing questions for Afghanistan’s future president

Once in office, the next Afghan president must move fast to address important questions that will decide the immediate future of the country.

 Friday is UN Mine Awareness Day and Omer Hassan, who does demining work in Iraqi Kurdistan, is doing all he can to teach people about the dangers posed by landmines. Louise Redvers for The National

A landmine nearly ended Omer’s life but he now works to end the threat of mines in Iraq

Omer Hassan does demining work in Iraqi Kurdistan and only has to show people his mangled leg to underscore the danger of mines. With the world marking UN Mine Awareness Day on Friday, his work is as important as ever as Iraq is one of the most mine-affected countries in the world.

 Supporters of Turkey's ruling AKP cheer as they follow the election's results in front of the party's headquarters in Ankara on March 30. Adem Altan/ AFP Photo

Erdogan critic fears retaliation if he returns to Turkey

Emre Uslu is a staunch critic of Turkey's Prime Minister Recep Tayyip Erdogan. Now, with a mass crackdown on opposition expected, he is unsure when he can return home.


To add your event to The National listings, click here

Get the most from The National