Rupee's Dip Spurs Strategic Remitting in UAE

The Recent Dip of Indian Rupee Against Dirham: Why Aren't Indians in UAE Rushing to Send Money Home?

The recent depreciation of the Indian rupee has stirred mixed feelings among the Indian community residing in the United Arab Emirates. In the past, similar exchange rate fluctuations triggered massive remittances from Dubai and Abu Dhabi, yet surprisingly, money exchange and transfer service providers are currently reporting restrained activity. Instead of the usual 'queues at the counters', those remitting are now characterized by waiting and strategic thinking.

Figures on the Rupee's Depreciation

In recent weeks, the rupee has significantly weakened against the dirham. Whereas, at the beginning of the year, one dirham was valued at approximately 23.40 rupees, it has now exceeded 24.18. This represents about a 3.5 percent depreciation. Multiple factors contribute to this movement: higher US bond yields, capital outflows from Indian markets, global economic uncertainties, increases in US visa fees, and the threat of potential new tariffs all negatively impact the currency's value.

From Panic to Strategy

In the past, say in 2018 or 2022, similar depreciation led to a sharp increase in the number of remittance transactions. Indian workers and entrepreneurs in the UAE used the exchange rate advantage to send larger sums back to their families. However, the current situation is entirely different.

Reports from companies active in the foreign exchange market indicate that the number of transfers has not increased significantly; it has remained stable. The explanation is simple: the depreciation has not happened suddenly this time, but gradually, and the community reacted more calmly. More Indians working overseas are deciding not to send their entire monthly savings home at once but in smaller portions, either weekly or biweekly. The aim is to minimize the risk posed by exchange rate fluctuations.

A Shifted Mindset

This change reflects not only financial awareness but also learning from experience. Many feel there is no need to rush amid continuous depreciation, as the exchange rate might become more favorable in the coming weeks. This attitude significantly differs from previous impulsive decisions.

One crucial takeaway from the behavior of Indians living in the UAE is that financial discipline has increased. They not only better understand the impacts of exchange rates but also consciously handle their financial strategies. Transferring in smaller amounts is not only a rational decision but also a form of cautious foresight.

Dilemma of the Indian Central Bank

The depreciation of the rupee also poses a challenge for the Reserve Bank of India. Excessive intervention in the foreign exchange market could diminish the country’s foreign reserves, while allowing the depreciation to continue could import inflation, notably affecting the prices of energy and raw materials. Analysts suggest that the central bank will likely pursue a 'controlled depreciation' strategy, intervening only moderately if the rate shows excessive volatility.

More Rupees for the Same Dirhams—but Is It Better?

Naturally, any depreciation means that families back home receive more rupees for the same dirhams. This is theoretically beneficial, particularly for those with regular expenses in India: education, household maintenance, family support. However, for foreign workers, this does not necessarily provide immediate motivation for remittances, as many manage their savings according to long-term plans: property purchases, investments, or business start-ups.

Remittances Remain Strong

Though the current depreciation has not sparked another wave of transfers, Indian remittance remains at the forefront globally: reaching 125 billion dollars in 2024, nearly half of which comes from GCC countries, including the UAE. According to financial experts, the remittance volume will remain strong this year, but a significant surge like in previous years is not expected. Indians working in the UAE have gotten accustomed to a 'new norm' of a weaker rupee.

Conclusion

The depreciation of the rupee against the dirham generated hopes for another remittance wave among many, but this year is different. Instead of panic-driven transfers, the Indian community in the UAE has shifted towards strategy. They exhibit waiting, deliberate scheduling, and financial self-discipline. The ongoing economic processes—the global interest rate environment, capital market movements, and Reserve Bank of India’s decisions—will continue to shape the exchange rate long-term.

This calmer approach is not only a sign of the maturity of the Indian community but also an indication that those living in the UAE's economic environment are becoming better at understanding and leveraging their financial opportunities, not merely hunting for short-term gains but for long-term plans.

(Article source: based on exchange rate trends.)