Students abroad to feel pinch; NRE boon

The traditional beneficiaries of a weak rupee have been the textiles and gems and jewellery sectors. That was the case as long as global demand was strong. In the current environment,however,demand is sluggish,which is why the benefits are limited. In the case of gems and jewellery,even that is eaten into,as the raw material is imported and the expenses on that count fluctuate with the movements in currency.

In the case of gold,a significant proportion of imports are bought within the country as finished jewellery leaving little for exports and any gains from there.

For importers,the risks are heightened on account of currency volatility. Companies that have borrowed abroad will see a rise in their debt burden as the dollars borrowed are converted into rupees in India,and the dollars that have to be repaid are first converted from rupee cash flows and that rises with a falling rupee.

Who gains,who loses: The biggest beneficiaries are Indians earning abroad and remitting money to India for their family needs or even into their NRE accounts that are offering them up to 9.5 per cent on deposits. The sharp depreciation in rupee combined with deregulation in interest rates on NRE accounts has resulted into a net inflow of $7.46 billion in 2011-12,the highest annual inflow in a decade.

Next are exporters who will witness a jump in their receivables. However,exporters who use imported inputs will have to factor in the rising costs. While the importers are the biggest losers,India as a country stands to lose the most because of the huge crude oil imports.

Indians studying abroad will find their expenses go up by almost 20 per cent merely on account of the rupee depreciation,and so will those planning a foreign vacation.