Dubai: A sharp rise in India’s consumer prices will impact the spending and investment pattern of non-resident Indians (NRIs) according to financial experts.
A general increase on prices above most forecasts, especially food prices to 14.72 per cent last month is expected to impact the family budgets of many NRIs who send a significant portion of their earnings to support families in India.
“Rising cost of living in India is indeed a big concern for NRIs. On the face of it, decline in rupee’s exchange value might look attractive, but the debasing of the currency simply means its purchasing power gets eroded,” said Y. Sudhir Kumar Shetty, Chief Operating Officer of UAE Exchange Centre.
Some analysts say higher inflation poses both risks and opportunities for Indian expatriates in the current economic context. “While the purchasing power of rupee takes a hit and investment values erode in real terms, decline in the value of the rupee, to a certain extent offsets this loss. However, NRIs should be judicious in spending,” said Sajith Kumar P.K, CEO & Director of IBMCL Financial Professionals Group, Dubai.
Rising consumer prices, the Federal Reserve decision on tapering next week, a potential year-end sell-off by foreign institutional investors and the increased demand for dollar from oil marketing companies are likely to put further pressure on the rupee. Analysts say the rupee could trade in the range of 62 to 65 per dollar between now and March, but will be unrealistic to expect it to fall to its August record low of Rs68.85 to the greenback.
“There is clearly an opportunity for NRIs to get higher exchange rate and invest in India at lower asset prices. With the markets due for a correction up to 10 per cent, there is window to buy stocks cheap and earn better returns when inflation declines and stability returns. But it is certainly not the time to spend on consumption,” said Kumar.
India is Dubai’s top total non-oil foreign trade partner, with trade volumes over the first nine months of this year reaching Dh111 billion.
