Neeraj Khanna, co-founder and director, Spark Career Mentors, sums up the anguish of many parents due to the steady decline in the rupee. “Several mid-senior level corporate executives have taken the tough call of not sending their children abroad. I know of a few students who suffered from depression due to the last-minute change in their education plans.”
With the rupee hitting Rs 72/dollar on Thursday, things suddenly don’t look too good on several counts. Education abroad will get more expensive, travelling too will be hurt, and for ones in the country, more expensive crude oil prices will stoke inflation.
Education: According to Khanna, parents who sent their child to study abroad last year are in an even worse state because they have no choice but to cough up a significantly higher amount for the next three years of undergraduate studies. In the case of Masters’, many students are self-funding their education or have taken loans. And both may not be sufficient anymore. Overall, the situation for several thousand aspirants and their families isn't so great.
However, the good news is that most would have already finished their payments this year and would have have landed in US campuses, say experts. By the first week of September, banks would have already disbursed loans. Also, the tuition and other annual fees would have been paid, and students would have landed for orientation programmes.
The trend may have a negative impact on the flow of Indian students to the US in the next academic year. As such, from Rs 65 levels in March, when applications were being filled and submitted with universities abroad, the rupee has fallen to Rs 70 in August. “Parents and students are relieved academic sessions have begun before they could witness the latest fall in rupee. However, for those weighing in the pros and cons of choosing the US as a destination for the next academic year, this is going to have an adverse impact," Arun Jagannathan, CEO and Founder, CrackVerbal, an overseas education service provider told Business Standard.
According to overseas education experts, those still in the middle of making final tuition fee payments in the US will have to additionally shell out anywhere from Rs 400,000 to Rs 600,000, compared to what they would have envisaged in March-April, while accepting admission when the rupee was at Rs 65 to the against dollar.
By July and August, students finish making upfront payments for tuition fees for the year, apart from administrative costs such as buying books and laptops, as well as living costs like booking flights, dormitories, etc., which would be an additional $4,000-8,000, depending on location and university campus.
According to Vibha Kagzi, founder and CEO, ReachIvy.com, there could see a shift in trends towards other countries offering high-quality education, such as UK, Canada, and Singapore. While the US will continue to rank high on the preference list, there is a marked shift in student preference to countries where the price point is not too high, and the value-add is perceived as excellent.
Students’ corner: “We advise students to look for scholarships to fund their study abroad. Many top-ranked colleges abroad offer scholarships to deserving candidates,” adds Kagzi. In addition to getting scholarships, students can also look for part-time work at the college to fund/offset their loans. It is common practice for students to take up campus jobs, internships, teaching or research assistant roles to fund their education. Not just that, even by keeping a check on their budget and lifestyle, students can save a lot of money. However, what is important is that if they are planning to work in the US, the return on investment may work in their favour in the future.
Vacation: If you have already booked your flights and hotels in advance, then the rupee depreciation will not affect you much. What will rise is the cost of food, local travel, tickets for sightseeing, etc. Sharat Dhall, chief operating officer (B2C), Yatra.com, points out that the rupee has depreciated against the currencies of Europe, UK, US, Hong Kong, China and Singapore as well. So, going to such countries has also become more expensive.
Karan Anand, head-relationships, Cox & Kings, says that most people do factor in the possibility of a fluctuation in the exchange rate.
They keep a buffer of 5-10 per cent in their budget to take care of such fluctuations.
Vacationer’s corner: Manmeet Ahluwalia, head of marketing, Expedia India, says that those who are still in the research stage can plan to go to a South-Eastern country instead of the US. Similarly, Western Europe is more expensive, so you can travel to Eastern Europe. Even the number of days can be reduced from 15 days to 10. In the case of accommodation, you may downgrade from a five-star to a three-star hotel. A country like Turkey, whose currency has been on a free fall, can be a good destination now, say experts.
International funds: Apart from portfolio diversification, which is the most common reason for investing in international funds, many investors have goals that are dollar-denominated. For instance, they may want to send their children abroad for higher education. Or they may want to buy a house in a foreign country. International investing allows them to start creating the corpus today, in a foreign currency, for expenses in a foreign currency.
There is a benefit for the investor from the depreciation of the rupee against the dollar and other leading global currencies. The Indian rupee depreciates over time because inflation in India is higher. Because of that difference in inflation, the rupee tends to depreciate by two-three per cent a year. It may happen each year, or it may happen at one go after, say, five years. But over time, the fund can expect the rupee to continue to depreciate against a basket of global currencies. So if you build your investments in dollars, and over time the rupee goes from 70 to 100, then even if the US markets do nothing, you will still have a 30 per cent return. These are some of the reasons that investors may want to invest in a foreign fund.
There are tax benefits as well. While domestic equity funds have a long-term capital gains tax of 10 per cent which is charged after one year, international equity funds are treated as debt funds. The treatment of debt funds is that after three years, you will be taxed after indexation. Therefore, the longer the investment period, the lower the tax rate on a debt fund.
Nikhil Banerjee, co-founder, Mintwalk prefers US funds currently. “These funds invest in companies that are listed in the US. Usually, a large-cap stock listed in the US is a world leader. Alphabet, Facebook, etc may be listed in the US, but they are actually earning from countries like India. These companies have global operations. Their stock prices benefit from their underlying growth in India. Therefore, even if one is investing in a US-listed company, one is actually taking a global exposure,” he says.