Strong Rupee = Bad News for the Gulf
Strange but true.
My knowledge about the effects of a strong rupee against dollar never went beyond the benefits it would bring to people who would import stuff and pay in $$$s and the negative effect it would have on the exporters. Of course, the strong rupee affecting the profits of Infosys this year did make some news. But I was surprised when I read this news on a Dubai-based website. Due to the strong rupee over the last few months, it says, the construction industry in Dubai is mighty scared! Most of the workers are Indians they were happy as long as one dirham fetched around 12 rupees. But now, it fetches less than 11 rupees.
This is because the currency in Dubai is pegged to the dollar. Its value varies along with the value of the Dollar. The effect of the strong rupee has been accentuated by the high inflation in the UAE and of course the booming Indian economy. The construction boom in the Indian economy is driving wages up and is likely to attract the huge Indian working population back to their motherland. To understand what this means to countries like Dubai read the following quote from the website linked above:
“Migrant Indian workers have been the driving force, the engine room and the foundation of the economic miracle in lower Gulf countries.”
This is especially bad news for the construction companies who are now facing a labour shortage!
Strange are the ways of global economics!