How Weak Rupee is Making NRIs Richer

Indian Rupee (INR) has depreciated over 20 percent against the US dollar since August of 2011. In August 2011, one US dollar was giving only Rs 44, then in January 2012 it fetched Rs 52 and today it has fallen to Rs 59 or so.

Hence, you are seeing a trend in which rupee continues to fall rapidly. If you listen to economic experts and gurus then they say this is not good for the country.

However, it might not be good for our country but there is a lot which is benefiting greatly because of the Rupee depreciation.

And that lot is NRIs or non residential Indians. So, how our NRIs are getting richer as rupee continues to fall.

week rupee for NRI

Let us first begin with fixed deposit. The reserve bank of India or RBI deregulated interest rates on NRI deposits. In reaction to this all the banks increased their rates on such deposits up to 6 percent. Therefore in simple terms, the NRI deposits which were making less than 4 percent just 3 months back, are now getting up to 10 percent a year.

Now this is a great benefit for NRI’s who are depositing their money in Indian banks.

Moreover, NRI’s could also benefit if they deposit their dollar earnings in Indian banks then they get 7 to 8 percent post tax returns.

To make in simple, let me give you an example.

If a NRI pays Rs 50,000/- per month for EMI on a home loan then in August 2011 this amount would be $1136 but now because of rupee depreciation it would be only $862. So for an EMI he has to pay only $862 instead of $1136, thus saving $274 per month.

NRI could keep making money if they are investing in India on a long term basis.

Now let us see how NRI are getting richer because of taxation.

For your information, interest on NRE and FCNR accounts is tax free in India however tax rate for interest income from NRO is 30 percent.

But for NRIs living in countries with which India has a Double Taxation Avoidance Agreement (DTAA) can enjoy lower tax rates.

India has a DTA agreement with US and many other countries. So NRI based in USA need to pay only 15 percent on interest earned on NRO deposits.

Therefore, increase NRI deposit rates, continuous rupee deprecation and tax benefits under DTA agreements could help NRI’s to get more investment in India and that makes them richer.

As I said earlier not only fixed deposit but equity markets are also great way to make money because it has also fallen 20 percent.

Even the debt market is lucrative as government securities and Treasury bill trading over 8 percent.

The other area which is going to benefit NRIs is the real estate properties.

Depreciation in Indian currency is helping NRIs to make investments in real estate sector of India. They could now buy properties at cheaper rate in India.

For example “The enquiries from NRIs for buying property in India have risen by 15-20 per cent following the rupee’s depreciation. The enquiries might go up further once the currency touches the 60-a-dollar mark,” said Harinder Singh, Managing Director of Realistic Realtors.

The number of calls from NRIs has gone up to 800 per month from 200 earlier at Investors Clinic.

Similarly, real estate portal CommonFloor.com is getting 10 lakh visits every month that is double what it was getting few months back.

The NRI’s mainly coming from US and Australia for the more high-end properties.

According to Sumit Jain, CEO of CommonFloor.com “With rupee depreciation, slowdown in real estate market and government policies including the one on farmhouses in Delhi, this is the right time for NRIs to invest in India,”

Mumbai and Delhi-NCR area is the most preferred destination for them.

Hence, purchasing real estate properties is helping NRI’s to save and make more money.

Finally, weak rupee helps NRI’s family to receive more rupees.

According to RBI India receives around $70 billion in remittances. It could be through private transfers, local withdrawals and redemptions from gold and silver brought through passenger luggage.

India gets its bulk of remittances from Europe and North America mainly from highly skilled professionals working for software companies.

So weak rupee gives more return for one dollar. It will really benefit NRI and their family in India.

In conclusion, I would like to say falling rupee could make NRI’s richer in following areas.

  1. Fixed Deposits
  2. Tax Exemption
  3. Equity and Debt market
  4. Real Estate and other Properties
  5. Remittances from foreign countries

So these are 5 broad categories which are making NRI richer. Only thing they need to do is keep investing in India.

However, if macroeconomic condition of the country changes then the situation which is prevailing right not might change.

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