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NRIs: Non-remitting Indians - Views on News from Equitymaster
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  • Apr 2, 2009

    NRIs: Non-remitting Indians

    Another acronym for NRIs
    As if the flight of FII funds to foreign shores was not enough, even remittance of foreign money is likely to see a huge slump in the wake of the global financial crisis. As per a leading business daily, the Planning Commission has submitted a report to the Ministry of Finance citing a possibility of huge decline in NRI remittances. The report states that with the deepening crisis and loss of jobs for migrant workers, remittances from Non-Resident Indians (NRIs) could decline by as much as 20% in FY09. As per the report, total foreign inflows (including investments and private transfers) will be around US$ 65 bn as against US$ 81 bn in FY08, implying a fall of nearly 20% YoY. However, it also projected that foreign inflows could surge to US$ 90 bn dollars on account of one time increase in private transfers in the likelihood of Indian workers abroad deciding to bring home their accumulated savings on losing jobs.

    As per a recent report released by the RBI, while the FDI inflows and NRI deposits in banks (due to the attractive interest rates) remained robust, fall in portfolio investments and banking capital were the prime reasons for the drop in the country's forex reserves in the nine month period until December 2008.

    Sources of variation in India's forex reserves
    (US$ m) Apr - Dec 07 Apr - Dec 08
    I Current Account balance (15,508) 36,469)
    II Capital Account (net) (a to f) 82,682 16,089
    a Foreign Investment 40,197 4,032
    FDI 6,905 15,373
    Portfolio Investment 33,292 (11,341)
    b External Commercial Borrowings 17,410 7,114
    c Banking capital 5,931 (129)
    of which NRI deposits (931) 2,115
    d Short term credit 10,719 547
    e External assistance 1,274 1,861
    f Other items 7,151 2,664
    III Valuation change 8,963 (33,375)
    Total (I + II + III) 76,137 (53,755)
    Source: RBI

    Prices deter India's gold imports
    The steep prices of the yellow metal have finally dissuaded Indians who happen to be the largest consumers of gold from importing the metal in March 2009. India has been importing less of the yellow metal in recent months as prices remained volatile amid the financial crisis. As per the Bombay Bullion Association, the country which imports about 90% of its annual demand of 700 to 800 tons, has imported around 2 tons so far in 2009, with no imports seen since February. In comparison, India had imported 62 tons in the first three months of 2008.

    Bengal's Nano dreams back on track
    As per reports in a business daily, the Tata Motors' much publicised offering 'Nano', which has often been compared to the iconic Ford Model-T, is trying all options to keep the variation in price tag minimal. Even if that means Mr. Ratan Tata having to take back his words and revive the abandoned plant in Singur, West Bengal. It may be recalled that last year, Tata Motors was forced to shut down the US$ 350 m project in Singur after weeks of violent protests by farmers whose land was acquired by the Bengal government for the factory. With production deadline approaching, the Tatas opened another plant in Gujarat to manufacture the Nano. However, the Gujarat factory, with a capacity of up to 500,000 cars a year, is unlikely to open until the year's end. Until then, Tata Motors will produce 50,000 cars a year from its plant in Pantnagar in northern India. It is believed that Tata Motors will have to produce Nano at least at four locations to keep the cost of transporting the cars minimal and sustain the promised price tag. Thus, the Singur plant which is nearly 85% complete with all the machinery and equipment installed; is being reconsidered.



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