Rise In Indian Remittances From The Gulf Hides Tales Of Coronavirus Heartbreak

Remittances to India from the Gulf region are booming despite the economic turmoil imposed by the coronavirus, with many Indian banks reporting growth of up to 20 percent.

The rise in NRI (non-resident Indian) remittances during April-July from the Gulf region, are said to be propelled by the twin factors of a plunge in rupee value and expat Indians rushing to move part of their savings home in the wake of uncertainty related to the global pandemic.

And bankers in India expect a further jump in NRI remittances in the next two months on account of annual bonuses and leave encashment payments made to expat employees by companies and establishments in several GCC countries during the August-September period.

The trend has debunked widespread fears among economists and policy makers about a drastic fall in the inflow of remittances in the wake of widespread salary cuts and job losses of expat Indians working in Middle East countries.

A World Bank report in April has also projected a 23 percent fall in remittances to India this year to $64 billion from the $83 billion in 2019.

Rupee value dived to 75-76 against the US dollar during April-August period – it fell to an all time low of 76.94 on April 21 - while as many as 500,000 expat Indians registered with Indian consulate general’s office in Dubai for repatriation in the early months of the pandemic.

Many leading Kerala-based banks such as Federal Bank, South Indian Bank, CSB Bank, as well as national banks such as SBI and PNB are understood to be among the banks which have seen positive growth in NRI remittances during April-July period.

“We have seen a growth of about 20 percent in NRI remittances from April to July period compared to the last year corresponding period,” the official in charge of NRI accounts at a leading Kerala-based private bank, who wished even not to identify the bank because of regulatory issues, told Arabian Business.

Officials at some other banks also revealed an increase in NRI remittances during April-July period, compared to last year while Reserve Bank of India’s composite data on NRI remittances to India was not available on its site.

Remittances in India decreased to $14.89 billion in the first quarter of 2020 from $15.18 billion in Q4 2019, according to data put out by Trading Economics, an international agency that tracks major economic indicators of 196 countries.

The UAE tops the list of NRI remittances to India, followed by the US, Saudi Arabia and Kuwait, according to India’s Ministry of Overseas Affairs.

Hero to Zero: stories behind remittance statistics

Behind the statistics on the rise in remittances lie the hardships of families and the growing tensions of thousands of expat Indians who had to return home to a bleak future after losing their dream jobs in the Gulf during the pandemic period.

“I need to do a job, even if it’s a daily wage job as I need to feed my family and fetch for the high education fee for the children - one in first year of under graduation and the other in class X,” said 52-year SC Santhoshkumar, who had to return to his home state of Kerala after losing a comfortable job in the central services department of Emirates in May.

After he joined Emirates – where his last salary was about Rs160,000 (roughly $2,178) and perks which included free tickets for family for international travels - he was living with my family in Dubai.

"After rent and the school fees payment for my two kids in a reputed school in Dubai, there was hardly anything left to save,” Santhoshkumar told Arabian Business.

Santhoshkumar said he is equally pained over the attitude of some of the members of his extended family, whom he used to help generously during his 27-year stay in UAE, after his return home.

“Many of my extended family members now keep a safe distance from me – literally! Not because of any Covid infection fear but, maybe, because of the fear that I could ask for some help.”

For Francis Noronha, who hails from Ponda in the western coastal Indian state of Goa, the story is equally heart-breaking.

Noronha, who lost his job with a logistics company in the UAE recently, is still staying in the country thanks to the government’s decision to extend the deadline for returning for visa expired expats.

“From a hero, I am now becoming a zero, as I have no money to even survive here (UAE), forget about sending home,” he lamented.

Similar stories of expat Indians are being talked about from many Indian states.

“My only relief is that I have no debt to repay,” Santhoshkumar said.

Not every Gulf returnee is as lucky as Santhoshkumar.

“There are thousands and thousands of families in states like Kerala, Tamil Nadu, Andhra Pradesh, Punjab and Goa who have been totally dependent on remittances from their breadwinners in the Gulf countries and who are finding themselves now left in the lurch,” Dr KN Harilal, considered an authority on NRI affairs and professor at Centre for Development Studies, Trivandrum, told Arabian Business.

“Many of them still have EMIs on their housing, education and other loans to pay, leave aside meeting their daily household expenses,” Harilal, who is also a member of the Kerala State Planning Board, pointed out.

Impact on Indian economy

The recent rise in NRI remittances has come as no panacea for India's battered economy as the lion's share of the inflow are kept in bank deposits, instead of the pre-Covid habit of immediately finding their ways to the market, making heavy purchases and investments, fuelling the consumption economies of many Indian states.

NRIs parked almost $2 billion in April alone in rupee deposits with various banks, according to RBI data. This was the highest single month flow in 26 months.

“NRI remittances used to account for almost 25 percent of the GDP of states like Kerala, home to the large chunk of Indian expats, especially in the Middle East. In states like Punjab, Tamil Nadu and Andhra Pradesh also, remittances from overseas accounted for a significant part of their GDPs,” Harilal said.

Harilal said inflows from overseas used to fuel huge levels of purchases and investments, boosting economic activities in these states, bringing increased tax revenues to the respective state governments to fund various welfare schemes.

“With almost 80 percent of remittances now parked in bank deposits, the hope of NRI money coming to the aid of recovery of local economies in trying times like this are finding misplaced,” Harilal said.

Ashok Jha, a former finance secretary to Government of India and a public policy expert, said unlike the normal times when banks welcome more deposits to fund projects, the swelling NRI bank deposits would only hurt them now.

“Banks in India are faced with excess liquidity currently as they are reluctant to extend loans to companies and finance projects because of the prevailing high risk scenario,” Jha said.

“What the Indian economy badly needs now is increased spending by customers. Unfortunately, people, including those with NRI incomes, are totally avoiding discretionary spending and try to latch on to whatever they have because of the current uncertain times,” he said.