NRI deposits nosedive, due to oil price tremors in Gulf

With fading away of the glorious years for the oil-rich countries in the Gulf following the crude prices battling to inch up, the Non-Resident Indians (NRIs) net deposits inflows have seen a huge drop of 98 per cent in the first five months of current financial year over the same period of 2016-17, according to an ASSOCHAM analysis.

The NRI deposit flows have nose-dived from USD 3.84 billion in April-August of the previous fiscal to a mere USD 434 million in the same period of 2017-18.

Consequently, the aggregate outstandings of NRI deposits have dropped to USD 118.46 billion as on August end, 2017 (the latest data point) from USD 130.16 billion a year ago.

The NRI deposits flow into different accounts like Foreign Currency Non-Resident (Banks) FCNR (B), Non-Resident External Rupee Account( NR(E)RA) and Non-Resident (Ordinary) accounts , the largest being the NR(E)RA.

The NR(E)RA has witnessed more than 50 per cent decline in the deposits to USD 1.53 billion during April-August this fiscal against USD 3.3 billion in the same period of 2016-17. Under the other heads, there has been a net outflow, rather than inflows.

"While there are various factors responsible for the NRI flows, including the interest rates, but 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.

Contrary to a popular perception, there were more people going to the Gulf nations from UP and Bihar in the past few years than Kerala.

Commenting on the development, the ASSOCHAM Secretary General Mr D S Rawat said, "while easing of oil prices by more than half has helped the Indian macro economic by slashing of the import bill, our work force overseas has suffered the collateral damage".

The NRI deposits, have traditionally been a very stabilising factor on India's overall balance of payment. While thanks to robust inflow of funds into the Indian stock markets and debt from overseas financial players, the country has abundant foreign exchange reserves.

"However, the money from the overseas financial players is hot and the movement can be quite volatile," the chamber noted, emphasising the Indian human resource for the global markets would undergo a churning in the years to come.

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