This post was originally published on 11 January 2016 and the content may be outdated.
The crash in crude oil prices and its crippling impact on economies of the Gulf nations can deal a severe blow to remittances to India, says industry body Assocham.
Maximum impact to be on Kerala
An analysis by Assocham observed that the maximum impact could be felt in Kerala where almost every other family is dependent on remittances, mostly coming from the Gulf nations. States like Punjab, Uttar Pradesh which also send a sizeable number of the workforce there would also be affected.
Of about 20 million NRIs spread in 110 countries, around six-seven million are in the Gulf states of whom two million are estimated to be from Kerala, a report by PTI says.
Gulf economies under pressure
“As meltdown in crude is leading to a price war among the major oil producers and prices breaching 11-year lows, major economies in the Gulf region have been caught off guard and their finances are going to come under a severe pressure.
Besides, fresh investment in the energy sector has come to a halt leaving a negative spin off impact on a host of sectors like construction, tourism, real estate, banking and finance,” the chamber said.
It said while the RBI data for April-September 2015-16 shows an uptick in the NRI deposits of USD 10.1 billion from USD 6.4 billion in the same period last year, the trend is bound to get adversely affected in a multi-pronged fashion, going forward.
Drop in recruitment rates forecasted
“For one, the number of workers, both the blue and white collar going to the Middle East on fresh recruitment is going to drop drastically while those already working in the region would find the going rather tough,” said Assocham.
Bulk of the Indians in the Middle East are spread in Saudi Arabia, UAE, Bahrain, Qatar while those close to the conflict region have returned to relatively peaceful places.
With a severe economic pressure in oil-producing nations, the expatriates mostly in the low income and labour oriented sectors like construction, hotels, restaurants, etc. would feel the heat in terms of the wage cut, layoffs and the terms of employment deteriorating, the analysis observed.
Contingency plan required
“It is a matter of concern and the Centre and the state governments should keep a contingency plan ready should a situation of workers’ displacement arise. Moreover, the Indian embassies across the Gulf nations should start assessing the situation and suggest remedial measures,” Assocham Secretary General D S Rawat said.
A sizeable portion of remittances to India comes from Gulf countries like Qatar, Bahrain, Oman, Saudi Arabia and Kuwait which account for about USD 33-35 billion.
The Associated Chambers of Commerce and Industry of India (ASSOCHAM) is one of the apex trade associations of India. The organisation represents the interests of trade and commerce in India, and acts as an interface between industry, government and other relevant stakeholders on policy issues and initiatives.
The goal of this organisation is to promote both domestic and international trade and reduce trade barriers while fostering a conducive environment for the growth of trade and industry of India.