Rupee incomes collapse in GCC

Indian workers’ salaries are worth 30 percent less in rupee terms than a year ago.

Early in 2006, Indian workers were flooding into the GCC to cash in on a construction explosion driven by soaring oil prices.

Wages and working conditions were less than perfect, but a career in boom towns like Dubai and Doha was viewed as considerably more lucrative than struggling in rural communities in the Indian interior, or earning higher wages but incurring massively higher living costs in Bombay or Delhi.

What a difference a year makes.

In March 2006, every dirham earned in the UAE was worth 12.7 rupees back home. Today, the interbank rate slumped to below 11 rupees to the dirham as the weakness of the US dollar drags down the value of Gulf currencies to which it is pegged. And the fast growing Indian economy strengthens the rupee.

The 15% plunge in the value of dollar-pegged currencies against the rupee has coincided with at least 10% inflation in the UAE, and probably as high as 15% inflation in the emirate of Dubai.

The wages of Indians in the UAE are therefore worth as much as 30% less than a year ago in rupee terms.

All of this comes at a time when wages are growing in India, particularly in the construction industry.

None of this is news to the hundreds of thousands of Indians living and working in the GCC. What is new is that the subject is bursting into the open, not because the construction labourers have suddenly been given a voice, but because construction companies are facing a labour crisis as Indians turn their back on the region in droves.

If this trend continues, the effects will be profound. Migrant Indian workers have been the driving force, the engine room and the foundation of the economic miracle in lower Gulf countries.

To prevent that workforce returning to its home country, the fiscal trends that have descimated their incomes must be reversed and their employers must offer salaries and working conditions that are more attractive than those on offer in India.

If the dollar peg is maintained - and the UAE certainly seems committed to this - then inflation must be tackled.

A correction to the runaway economy is essential, and the most effective tool for the UAE government to use is to limit the growth of the construction industry.

This is not a quick fix solution, because so many projects are underway and cannot be stopped, but new projects should be postponed and the government-set targets for economic and population growth should be reviewed.

For example, if Dubai wants to expand its population to five million, it should not be planning to reach this target by 2020, but perhaps by 2040.

The changes in the world around the Gulf cannot be ignored. The dollar looks certain to remain weak indefinitely; the rupee will continue to strengthen; and salaries and working conditions in India will rise.

GCC governments cannot ignore these trends, or construction work won't just slow down, it could grind to a standstill.

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READERS' COMMENTS

Rupee incomes collapse in GCC
Posted by Mayola Dsouza, Dubai on Monday 16 July 2007 at 09:00 UAE time


JW is very correct. Rob Corder should have titled the article as "Indian construction workers incomes hit hard..." since the article purely focused on the construction workers. Perhaps Rob is under the popular misconception that all Indians in the UAE are construction workers. This article only serves to perpetuate that myth and shows his ignorance. 
 
Rob I would like you to write another article focusing on Indian professionals who are highly educated and hold senior positions in various companies here in the Middle East. These Indians too suffer from the currency fluctuations just like the Europeans, Americans, South Africans, Australians and New Zealanders who seem to be the first choice for most of the senior job positions.

Your articles
Posted by NKumaresh, dubai, UAE on Sunday 15 July 2007 at 15:00 UAE time


You are spot on. This trend cannot continue. Either you take it or leave it is the mentality of most of the indians working here. This fits with the lower / middle / higher income individuals though the higher income can manage a bit in the short term. But if the trend continues, the UAE economy will come to a critical situation where there is no quick fix solution other than lifting the dollor peg or control the inflation.

Get it right
Posted by JW, Dubai, UAE on Sunday 15 July 2007 at 11:00 UAE time


Absolutely spot-on with your analysis, however, your headline should have read "Indian construction workers incomes hit hard..." to relfect the content of the article.  
 
And it would help thousands of Indians immensely if you could publish a more broad-based impact analysis rather than just on construction workers - we could then forward the article to our bosses and ask for a raise ... :-)  
 
Remember that there are thousands of Indians who are NOT construction workers and cannot be described as "..struggling in rural communities in the Indian interior, or earning higher wages but incurring massively higher living costs in Bombay or Delhi"; and whose economic reality from the USD slide is closer to the thousands of Brits, Aussies etc; that has been covered by the local press.

Real Fact
Posted by Raj, Doha, Qatar on Sunday 15 July 2007 at 09:00 UAE time

This is a real fact. Very nice report. To prevent the workforce returning to its home country, the fiscal trends that have decimated their incomes must be reversed.

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