The net deposits inflow by Non-Resident Indians (NRIs) dropped 98 per cent until August 2017 as compared to the same period of 2016-17, according to the Associated Chambers of Commerce and Industry of India (ASSOCHAM). The NRI deposit flow during the April-August period of the current fiscal year was $434 million as opposed to $3.84 billion during the same period in the previous fiscal year.
The reason for the decline was narrowed down by ASSOCHAM to a decrease in oil prices in the Gulf countries, which have a large population of migrants from Kerala, Uttar Pradesh and Bihar. The economic crisis in the Gulf has led to a steep decline in emigration of Indian workers from 2014.
“While there are various factors responsible for the NRI flows, including the interest rates, the most plausible at this point of time seems to be economic problems in the Gulf countries, the largest source of NRI remittances, particularly for the low income expatriates. Remittances have been affected for states like Kerala, Uttar Pradesh and Bihar, in particularly which have a large number of its people making living in the Gulf nations,” the ASSOCHAM paper said.
The NRI deposit flow was directed towards different kind of accounts, like Foreign Currency Non-Resident (Banks) FCNR (B), Non-Resident External Rupee Account (NR(E)RA) and Non-Resident (Ordinary) accounts. NR(E)RA, which saw the most inflow among the three, has seen a 50 per cent decline from $3.3 billion to $1.53 billion year-on-year. There have been outflows in FCNR(B) and Non-Resident (ordinary) accounts.
The aggregate outstandings of NRI deposits also dropped to $118.46 billion as on August end, 2017 (the latest data point) from $130.16 billion in 2016.
Commenting on the development, ASSOCHAM secretary general DS Rawat said, “While easing of oil prices by more than half has helped the Indian macroeconomic by slashing of the import bill, our work force overseas has suffered the collateral damage.”
Gulf Crisis
The economic crisis in the Gulf began in 2014 after international sanctions were lifted from Iran, allowing it to export oil again, leading to a glut. However, the divide in the Gulf countries deepened in June 2017 when Saudi Arabia, United Arab Emirates (UAE), Bahrain and Egypt announced that they were severing all political, economic and diplomatic links with Qatar, which is also a member of the Gulf Cooperation Council (GCC). Kuwait and Oman, also GCC members, have refused to follow Saudi Arabia.
“However, the money from the overseas financial players is hot and the movement can be quite volatile,” the chamber noted, adding that there will be significant change for the Indian human resource for the global markets.
According to official figures, the number of Indians emigrating to GCC countries fell from 775,845 in 2014 to 507,296 in 2016. There has been almost a 50 per cent drop in Indians emigrating to Saudi Arabia. Apart from the dwindling economic situation, the Islamic State group’s control over Iraq and Syria also created immense disturbance in the region.