T. Ramavarman

Large sections of Non-Resident Keralites and their dependents back home are beginning to feel the pinch

It is the earnings of migrant workers in the Gulf that have kept the Kerala economy afloat for a long time now. But the appreciating rupee is leaving most of the migrant workers poorer and its consequences for the State’s economy could be unpredictable.

THIRUVANANTHAPURAM: Reports that the rupee is chipping away at the exchange value of the greenback should be quite heartening for everyone who is bullish about the Indian growth story. But for Indians living and working abroad, particularly those in Gulf countries, it is proving to be a tough call what with their ‘take home’ salary becoming slimmer with every upward push of the rupee.

Large sections of Non-Resident Keralites (NoRKs) and their dependents back home are beginning to feel the pinch as they find it harder to maintain the level of remittance that they used to have a year ago. The shortfall in remittances in real terms, as a result of the appreciation of the rupee, is estimated to be around 15 per cent and this, it is said, is forcing many to put on hold several of their ambitious plans.

“My brother, who is working in Qatar, is now in a fix because he is unable to send the money required for buying the floor tiles for the home he is constructing here. The tiles would cost about Rs.2 lakh, but now he has to mop up dhinars equivalent to Rs.2.4 lakh to be able to send home the same amount because of the rising rupee. He has been waiting for the last six months to send the money hoping that the price of the rupee will come down,” says P.T. Asharaff of Chettuva in Thrissur district.

Retention level

P. Mohanan, general manager, Canara Bank, says that remittances have shown a declining trend in recent times in the State and that the level of retention of remittances in the banks has also begun to come down. Even though factors such as diversion of deposits to other attractive investment avenues like real estate in the wake of the fall in interest rates may have contributed to this dip in NoRK deposits in the State, the rise in the value of rupee has also played a significant role in it, Mr. Mohanan says.

It is the low-earning category of migrant workers who have been hit hardest, because they cannot afford to park their meagre earnings elsewhere and wait for the rupee to fall. Kerala Kesari of Velur in Thrissur district, who runs a manpower supply firm in Bahrain, says, “With the rise in the value of the rupee, the migrant workers have to earn higher amounts in terms of Gulf currencies to send the same amount of rupee they had been sending home earlier. But there is no corresponding increase in their salaries,” he says.

Added to this is the rise in the cost of living, both in India and in the Gulf countries. “Most of our workers are not able to comprehend how their savings have come down in terms of rupees and are despondent as none is lending a helping hand to them,” says Mr. Kesari.

Study findings

A recent study conducted by K.C. Zacharia and S. Irudaya Rajan of the Centre for Development Studies (CDS) here says there are 19.44 lakh migrant workers from Kerala spread all over the world and that nearly 89 per cent of them are in the Gulf. They had sent home Rs.24,525 crore last year and the dent that any significant fall in the real remittance can be imagined.

According to experts, the value of the rupee has, on an average, gone up by 14 per cent against the currencies in the countries of West Asia during the last one year, which means that there has been a 14 per cent fall in the remittance potential of the migrant workers. This would translate to a dip of Rs.3,400 crore in the potential remittance to the State last year, according to B.A. Prakash, Head of the Department of Economics, University of Kerala.

Prof. Prakash, who has been studying the impact of remittances on the Kerala economy over the last two decades, warns that this trend, if not corrected through appropriate measures, could lead to recessionary trends at least in districts such as Malappuram, Kozhikode, Thrissur and Thiruvananthapuram, which together receive over 54 per cent of remittances that flow to the State.

P. Bhaskar Rao, director, Wall Street Forex, Mumbai, estimates the fall in the savings of Indian migrant workers in the Gulf to be about 20 per cent during the last one-and-a-half years. The inflation rate in India during the period has been about 5 per cent, which means that the migrant workers have experienced an effective 25 per cent cut in their savings during the period, he says.

Reverse influx

“Migrant workers from India had gone to the Gulf countries hoping that they would be able to come back and settle down in their home village or town after saving a reasonable amount within a few years. The rupee appreciation has shattered their dreams. Now they may not be able to come back in the foreseeable future,” Mr Rao said.

Mr. Rao fears that an unbridled appreciation in rupee value might, in the long run, lead to a reverse influx of the Indian migrant workers from the Gulf, particularly in the wake of the acute competition that they face from labour from countries such as the Philippines, Bangladesh, Pakistan and Sri Lanka.

A reverse migration from the Gulf will have far-reaching socio-economic impact on the country, as the migrants are largely unskilled workers. Apart from Kerala, the economies of Tamil Nadu, Karnataka, Andhra Pradesh, Uttar Pradesh and Rajasthan will also have to bear the adverse impact of the appreciation in rupee value as they have a significant migrant population in the Gulf.

Experts warn that the fall in remittance from the migrants will have a cascading effect on other sectors such as construction and commercial activities, which support vast sections of population in the State.

K.K. George, chairman of the Centre for Socio-Economic Studies (CSES), Kochi, points out that it was the rise in remittances that had helped the State to tide over the crash in prices of agriculture produce in the 1990s. But even those who were vocal against the fall in the prices of plantation crops appear to be neglecting the woes of the migrant workers who sweat it out in the deserts of West Asia to eke out a living, he feels.

Big time exporters, who have also been facing a fall in income because of the rising rupee, have effectively lobbied their case with the Central government and wrested concessions running into crores of rupees to make up their losses. But the political leadership in the State is yet to wake up to the implications of the rise in rupee value for the ordinary migrant workers and put pressure on the Centre to extend a lifeline to them.