Impact of Weakening Rupee on Dubai's Indians

The Impact of the Indian Rupee's Weakening on Indian Workers in Dubai

Recently, significant movements have been observed in the foreign exchange markets, particularly regarding the exchange rate between the Indian rupee and the UAE dirham. The sustained weakening of the rupee has already pushed the exchange rate close to the psychological barrier of 25 - now nearly 25 rupees are required for a single dirham. This development not only affects financial markets but also directly impacts the daily lives of Indian workers in Dubai and other GCC (Gulf Cooperation Council) countries.

What is behind the rupee's weakening?

The phenomenon stems from various global and Indian economic factors. The Reserve Bank of India (RBI) is unwilling to defend any specific exchange rate level - stepping in only when excessive volatility is detected. India's financial leadership does not aim to artificially intervene in the exchange rate but rather relies on the self-regulating nature of the market.

The rupee's weakening is further exacerbated by the strengthening of the global dollar, increased dollar demand from importers, and the unwinding of positions in the offshore derivative market. The exchange rate recently reached 90.86 against the US dollar, with some forecasts estimating it could rise to 92 by March 2026.

Why is the 25 rupee mark significant for the dirham?

The UAE dirham is pegged to the US dollar at a rate of approximately 3.6725. Consequently, the rupee's weakening against the dollar automatically results in the dirham's appreciation against the rupee. The 25 rupee level is not only a psychological milestone but also practically significant, as each rupee's depreciation translates to more money for those earning in dirhams but sending remittances home in rupee terms.

This is particularly important for Indian workers living in Dubai and other Gulf countries who send money home to their families in India every month. Even a small exchange rate movement can make a noticeable difference for family members back home, especially regarding costs related to education, housing, and healthcare.

Long-term currency policy approach

According to the RBI governor, India's currency policy does not focus on defending set exchange rate levels, but rather on maintaining financial stability and market order. Looking at long-term trends, the rupee shows an average annual devaluation of 3%, attributable to India's higher inflation rates. In 2025, this depreciation reached 4.72%, marking the largest annual loss in the past three years.

This continuous depreciation is unfavorable for domestic imports but could benefit exporters and those remitting income from abroad. Indians living in Dubai fall into this latter category, and the current trend significantly improves the relative value of their remittances.

Social and familial impacts

For Indian workers in Dubai, sending money home is not just financial support but also a means to strengthen family ties. The current exchange rate movements offer the opportunity to remit more with the same level of income. This is particularly important for those saving for their children's education, elderly parents' medical treatments, or even purchasing a home.

A 0.30 rupee difference per dirham can mean tens of thousands of rupees more annually for a family. This makes it easier to cover rising costs, especially in an economic environment where India's internal inflation and service fees are continuously increasing.

What can we expect in the coming months?

According to current exchange rate trends and market forecasts, further weakening of the rupee is not out of the question. However, it is also true that the currency market is never linear, and short-term strengthening can occur, especially if the global trade environment improves or a favorable international agreement gives the rupee a boost. Nonetheless, most market participants currently see downward risks and consider breaking the 25 rupee level more likely.

Thus, foreign workers in Dubai might benefit from this exchange rate change in the short term. However, it is important to note that such favorable situations can be temporary, so it is wise to plan consciously and, when possible, secure longer-term financial stability.

Conclusion

The weakening of the Indian rupee is a result of complex economic processes, presenting both challenges to the Indian economy and opportunities for Indian workers in Dubai. The dirham's strengthening position against the rupee directly benefits those who remit part of their income home. Crossing the 25 rupee mark could be historically significant and is expected to further boost the volume of remittances.

Future exchange rate movements remain uncertain, so staying informed, practicing conscious financial planning, and keeping abreast of current currency market news are essential. Despite the current favorable situation for workers in Dubai, the long-term effects of financial decisions necessitate caution.

(Based on a statement from the Reserve Bank of India (RBI).)