NRI inflows rise on Iraq war threat_8332

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More than 3 million of India's 20 million overseas Indians work in the Gulf and interest rate differentials of nearly 200 to 250 basis points between the rupee and foreign currency deposits were an added attraction,You are not allowed to view links. Register or Login, traders said.
For overseas Indians, their banking system offers a safer refuge than the Gulf even though India has its own problems with political risk. Nuclear rivals India and Pakistan came close to war last year over Kashmir.
Such an upgrade would boost inflows from expatriates and foreign investors buying Indian assets, traders said.
Also importers are loathe to hedge their requirements because of a weakening dollar and the comfortable external position, including a current account surplus of $1.34 billion in the July-September quarter -- the third straight quarter of surplus.
"A lot of the expatriates' money is in anticipation of a war,You are not allowed to view links. Register or Login," said V Srinivas, chief forex dealer at JP Morgan Chase in Mumbai. "They also seem to be comfortable about India's external position."
In the December quarter, deposits may have grown by $1.0 billion to $1.5 billion after an aggressive rate cut by the US Fed Reserve in November,You are not allowed to view links. Register or Login, traders estimate.
Their remittances are expected to exceed another $1.5 billion before the financial year ends in March.
The record reserves have encouraged global rating agency Moody's to declare it may raise the country's forex debt rating from 'Ba2' in February.
"We could see an outflow of $8 billion to $10 billion in a matter of weeks as importers will rush to cover and the effects of the relaxed capital controls are seen," said a treasury head at one leading private sector bank.
January  16, 2003 15:24 IST
NRI inflows rise on Iraq war threat
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NRI inflows rise on Iraq war threat
Driven by fears that a war in Iraq may force them to repatriate, Indians based in the Gulf are sending their money home, swelling foreign exchange reserves to record levels and shoring up rupee sentiment.
Expatriates' remittances and rising trade inflows have helped the partially convertible rupee to rise 0.55 per cent against the US dollar in 2002, its first annual gain in more than a decade, and 2.3 per cent to 47.94-95 from its all-time low hit in mid-May.
Overseas workers also drew comfort from India's dismantling of some its archaic capital controls and make forex repatriation easier, said M R Madhavan,You are not allowed to view links. Register or Login, analyst at Bank of America.
Data from the Reserve Bank of India shows expatriates' deposits have risen nearly $1.6 billion to $26.73 billion in the first six months of the current year to March.
India's forex reserves, the world's seventh largest at $70.75 billion and equivalent to 14 months of imports, could top $80 billion by March, analysts said.
Oil has stayed above $30 a barrel in recent weeks due to fears of a US-led war in Iraq and a strike in Venezuela.
India imports 70 per cent of its crude oil requirements, which form two-thirds of the annual import bill of nearly $60 billion.
Traders said large unhedged positions of Indian companies that raised forex loans could pose a problem if there were a sudden reversal in sentiment on the rupee, or a war broke out in the Gulf and send oil prices soaring.