The euphoria has settled and Narendra Modi is now our Prime
Minister. What does that mean for NRI’s in the Gulf and more specifically in
Kuwait.
The Indian diaspora in Kuwait (and the wider Gulf) is
undergoing significant transformation from economic and social perspective.
During the past few years they have had to encounter several challenges in the
areas of education, investments, jobs and more importantly currency
fluctuations. All these factors tend to affect NRI mindset. Now that a new
leadership is in place in India, it will be interesting to see how this leadership
transformation in India will affect NRI’s. I see the following implications:
1.
Jobs
It is important to note that we have witnessed some
sluggishness in the GCC in terms of job opportunities and more so in Kuwait
where the exodus of people rendered jobless increased during recent years forcing
them to return to their motherland. Project
uptake has been slow in Kuwait and hence fewer needs for even low skilled
labors leave alone high skilled technocrats. Kuwait companies have been
restructuring and downsizing and hence finding opportunities for displaced
people is becoming that much more difficult. How will this situation change
given the new leadership in India? It may not change the situation here in
Kuwait, but it may change the situation back home in terms of job
opportunities. The main deficit India has been facing is that of confidence.
Narendra Modi will try and infuse that among business leaders who will then not
hesitate to invest in new projects leading to more opportunities back home. Also,
the clear mandate given to him by the people of India means that he can take
painful decisions without fear or favor. This is required to restart the Indian
economy and put it on track at the quickest pace.
2.
Rupee
The currency performance during the past few years has been
of great interest to NRI’s. Steady depreciation of rupee vis-à-vis other
currencies (especially USD) has given some cheer to the diaspora as they can
now remit more for the same Dinar. However, a strong Indian economy in the
medium to long-term will also mean a strong rupee which may not make NRI’s all
that happy. Expect Rupee to steadily appreciate over the next few years.
3.
Stock Market
Many NRI’s have invested in Indian stock market either
through mutual funds or directly themselves. Apart from real estate and fixed
deposits, stock market investing is a key element of investment for NRI’s.
However, over the last few years Indian stock market did not perform as well as
say the American stock market. The average annual return is about 11% during
the last three years. Corporates listed in the stock market are finding it hard
to report healthy growth in earnings, debt level in the balance sheet has
increased over time, and slowing economy has not resulted in increased demand
leading to lower margins and profitability. All this is bound to reverse once
economy is put back on growth track, and liquidity being made available to
sectors like Real estate and infrastructure for uplifting projects. Foreign
investors have already factored in a grand performance of stock market in the
coming years. Investments even at the current level may make immense sense for
NRI’s especially in blue chip companies for the medium and long-term though
stock markets always encounters volatility in the short term.
4.
Real Estate
NRI’s have significant real estate commitments back home.
Property market has not been doing all that great especially in metros and
other important cities. Though prices have not come down drastically, the
number of transactions have dwindled taking away liquidity. Major projects are
either on hold or getting unreasonably delayed while people borrowed to invest
in them. Real estate is a very important element of investing for NRI’s and
hence the new leadership is very important for this. The key limitation of the
real estate market is the lack of bank funding as banks have either reached
their limits or are wary about the non-performing loans to this segment. Also,
the dull performance of the IT sector means a significant slowdown in demand.
Modi government is expected to provide some directions to institutions and
enable reenergizing demand in this vital segment.
5.
Education
The higher education market in India is especially of
interest to NRI’s who invariably decide to send their wards either to India for
Bachelor’s degree or to the West if they can afford. However, options back home
are quite limited due to skewed demand supply factor where demand far exceeds
that of supply for leading institutions leading many NRI’s to fork out extra
money (under NRI quota) to get their wards admitted. A simple solution to this
problem is to establish more institutions of higher learning. Modi has already
made right noises in this direction by espousing “IIT’s and IIM’s in every
state in India”. If this dream comes true, then NRI’s can revel in delight and
need not worry about the expensive western education for their wards.
6.
Pride
After all, we are first Indian citizens and then NRI’s. We
will all feel immensely proud to belong to a nation that is vibrant, growing
and becoming influential in the global market place. We don’t want a weak and
non-performing India. Having a leader who can transform a weak India into a
super power is what we want to see as Indians and NRI’s. Narendra Modi
government should work itself towards this avowed objective and make us proud.
Jai Hind!
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