BJP’s big win: stability would come at a price for NRIs

By Manoj Nair,

Dubai: After nine months of getting more rupees for a dollar, expatriate Indians could now be confronted by the fact they could be getting less.

As the election results confirmed that the new government will assume power with a sizable majority, the money markets pushed the rupee to Rs55.30 to a dollar.

For sure, some of the exuberance should scale down in the coming days, but the prospects are that the rupee will be strong compared to its levels in the preceding weeks.

“The rupee should trade in the range of 58-60 to the dollar on the back of stronger dollar inflows into the Indian market in the short term,” said Siddarth Razdan of Dubai based I Capital Management Services. “But any further appreciation could hurt exports and aggressive RBI (Reserve Bank of India) intervention is expected around the 58 level.”

The rupee has been through some extremely volatile times since August last year, at one time even slipping to 68 to the dollar. The RBI governor, Raghuram Rajan, made strong interventions to arrest the slide since taking office in September last, which did arrest the slide. Even then, the rupee was in the 60-65 range in the period since.

In the medium term, the upcoming federal budget, India’s oil price import bills, US interest rates and the monsoons would determine the rupee-dollar movements. “It will take the new government at least six months to a year before any meaningful impact of policy and administrative changes kicks in and GDP growth inches forward,” Razdan said.

In the interim, senior business figures in the Indian community say the spotlight should be on the stability aspect.

“[As Gujarat chief minister] Narendra Modi has always shown great interest in NRI investment by hosting follow-up seminars after Pravasi Bharatiya Divas events — it would be a great initiative if NRIs could be nominated to the Lok Sabha to act as a bridge between the Government and NRIs.

“A weak rupee and expensive real estate are not in the general interest of the nation and this trend needs to be arrested by a stable government.”

For Yusuffali M.A., managing director of Lulu Group and director of Abu Dhabi Chamber of Commerce, the nature of the results suggests that the upbeat tenor recorded in the Indian stock markets in recent days could be sustained.

“The change in government is sure to bring in a fresh perspective and renewed thrust on inward investments into India,” said Yusuffali. “From an NRI perspective, I am hoping the Modi government will come out with clear policies aimed at NRIs and making us a part of the India’s growth process.”

Some corporate chiefs believe that the new government’s immediate priority would be to get the economy back on track. Growth were tapering off and concerns over high inflation continue to be rife.

“I am sure the new government will draw up a focussed action plan to bring about a paradigm shift in the way India pursues its growth agenda in sectors like infrastructure, financial services, energy, etc., with sustainable development as a core interest,” said Dr B.R. Shetty, chairman of UAE Exchange and CEO of NMC Healthcare. “The government will spike up the confidence of investors and help enhanced FDI (foreign direct investment) flow.”

That the new regime will be pro-business is a given.

“The government [will] follow a pro-business policy from the perspective of the national economy,” said Dr Azad Moopen, chairman and managing director of Aster DM Healthcare. “The unfortunate situation of small regional parties pulling the government at the centre in different directions caused havoc in the last 20 to 25 years. A clear mandate to the NDA (National Democratic Alliance) will ensure stability.”

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