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Sending money to India from UAE? Here’s why the RBI Governor’s exit could help

June 2016

By WM Intelligence

June 21, 2016 | 14:45 | Dubai

As the world prepares to face the possibility of a ‘Brexit’, India on its part is facing what many have come to term ‘Rexit’ – the exit of the current governor of the Reserve Bank of India, Raghuram Rajan. Raghuram’s term, which began in September 2013 has been lauded by many in terms of the apolitical stance taken by the 23rd Governor of the RBI and playing a very active role in aiding India emerge out of an economic turmoil to getting recognized as the fastest growing economies currently. Here’s a review of why his exit or the period of the next few months could actually aid your repatriating funds from the UAE.

  • As seen from the chart below, the month the announcement was made of Raghuram taking over a Governor, the INR strengthened against the AED from 18.14 to 17.06. Since then, the last 3 years have seen the pair move in a broad range with an upper limit of 18.77 recorded earlier this year. His exit and the related uncertainty is highlighted as a strong reason for a possible INR weakness in the coming months

Chart 1

 

  • Rajan has influenced foreign flows to the country – he lured inflows of about USD 34 billion through discounted foreign-currency swaps, helping lift the rupee from a record low. India’s foreign-exchange stockpile of USD 363.2 billion (as on June 10th 2016) has grown 32% during his tenure.As the INR grapples with uncertainty on the next Governor, the strong policy credibility that Raghuram Rajan has built up in the last 3 years is bound to take a hit.

Chart 2

 

The pair took support around 17.9 (Area of support as highlighted in our article What India’s Rate Cut Means for Expats and NRIs in the UAE?) and has since moved sharply towards the current level of 18.40. For now this uncertainty prevalent could well be a reason for you to prolong repatriating funds to India in the quest for a better rate in the coming months. In the interim though, it would be interesting to see how ‘Brexit’ interrupts ‘Rexit’

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