Hard workers are hardest hit

[Rishikesh]

We all understand that it is always poorest who has to pay most for society. Here is another example how hard working people are double hit, one by pathetic work condition, exploitation and now this exchange rate. Here is another point to be noted that India's globalization has till now been sustained by the Indian peasantry working across globe and not hyped software industry. Here is an article http://in.reuters.com/article/topNews/idINIndia-30277520071101 which shows what is the state of peasantry and following is an article on  contribution of hard workers and exchange effect on their little income.

Source: Hindu
URL http://www.hinduonnet.com/thehindu/holnus/001200711020333.htm


How rupee appreciation hits families dependent on forex remittances

D.Murali

Chennai: Much has been written about rupee appreciation and its adverse impact, especially on exporters. Not enough, though, has been talked about a huge section of the population that is dependent on foreign remittance, observes Mr Bhaskar Rao, Executive Director, Wall Street Finance Ltd, Mumbai.

"These people have lost their income by almost 20 per cent as compared to last year. This, coupled with the inflation and the high interest rate, has seriously affected them," he adds during the course of an e-mail interaction with Business Line. "Rupee has appreciated beyond sustainable levels. The exchange rate is not justified by its fundamentals at the current level."

Mr Rao, who was earlier CEO of the company, has about 25 years of experience in the banking and financial services sector, covering areas such as forex, treasury and global money remittance. Wall Street Finance Ltd is involved directly with the end customers as a service provider for remittance.

Excerpts from the interview.

How important are inward remittances?

Very important, they are, from an economic perspective. Indian economy survived the trade account deficits for more than a decade, owing to the invisibles, which are primarily remittances from individuals. It was these remittances, which ultimately brought down the current account deficits to manageable levels.

Are there details about the distribution of the remittance-dependent, and the remitters?

It is estimated that inward remittances are of approximately $28 billion per annum now. This mainly comprises remittances by individuals working abroad. Inward remittance plays a major role in the economy of Kerala.

We have a huge population of NRIs (non-resident Indians) working in Gulf, not only from Kerala, but also from Tamil Nadu, Andhra Pradesh, coastal Karnataka, West Bengal, Uttar Pradesh, and the Sikar belt of Rajasthan.

There are more than 10 lakh people of Kerala alone working in various Gulf countries, predominantly in unskilled and semi-skilled jobs. While the qualified professionals working abroad have a better bargaining power because of the alternative opportunities available to them, it is the vast population of semi-skilled and unskilled labour force that gets affected very badly by rupee appreciation.

An example.

Typically in a family, one earning member goes out to Gulf to earn livelihood. He earns his salary in one of the Gulf currencies and sends money back home for their maintenance.

Consider these data about the comparative rate of a few currencies as of two periods, viz. July 2006 and October 2007: $ - Rs 46.80, Rs 39.50; UAE dirhams – Rs 12.73, Rs 10.74; Saudi riyals – Rs 12.46, Rs 10.51; and Qatar riyals – Rs 12.84 and Rs 10.82.

Let us take the example of a typical semi-skilled worker, who earns approximately 2,000 dirhams in Dubai. He does not have any bargaining power with his employer, just because of the appreciation of rupee. Out the 2,000 dirhams he would have kept 1,000 dirhams for his living in Gulf, and the balance 1,000, he would have remitted to his family in India.

A year ago, this would have given the family an income of 1,000 x Rs 12.73 = Rs 12,730. Assuming that the family spent Rs 8,000 for expenses, the balance Rs 4,730 would have been saved, or earmarked for the payment of housing loan etc. Now with the changed exchange rate, the same 1,000 dirhams will give only Rs 10,740.

And if the lifestyle were to be maintained, with the inflation of around 5 per cent, the expenses would be Rs 8,400, even as savings dropped to Rs 2,340. If there is a housing loan to repay, then the interest on that will again have a negative impact, in addition to the above. The rise in the interest will wipe off the whole savings portion.

On further implications.

Unlike other savers, our workers in Gulf have to compulsory save for their retirement and for returning to India. Despite a reduction in income, they will not be able to bargain for a better salary. For, if they so do, they will be replaced by the workers from Bangladesh, Pakistan, the Philippines, Sri Lanka and so on.

Also, a situation of zero-saving may force the workers to return to India, which may have very serious social implications. Our policymakers have to come to the rescue of these masses through a better exchange rate policy, which is independent of the movement of hot money though the PN (participatory note) or the FII (foreign institutional investor) route but rather dependent on the purchasing power parity (PPP), in long-term interests.

**

http://InterviewsInsights.blogspot.com

[BhanuPrakash Singh]

 Dear all,

 With economic progress there will be change in rate of exchange. It will have dual effect. Imports are cheaper, acquisition of foreign assets  is  cheaper, export is hard hit, remittances are at a loss now etc. Looking at 2020 and India's position in the World, will this help? Economists have to comment.

 bhanu M

Rishikesh <rishikes...@gmail.com> wrote:

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