H-1B row, tariffs may sting rupee

Likely remittance hit, relentless FPI selloff to add pressure on current account

- Shayan Ghosh & Ram Sahgal

The fallout of US president Donald Trump's visa and trade barriers on remittances, combined with relentless foreign selling in the capital markets, could keep the Indian rupee under duress when it is already hovering around all-time lows.

Money sent home by Indians working in the US and the country’s export income will come under pressure because of Trump's continued arm-twisting of the world’s fourth-largest economy, be it through sudden and hefty fees on H-1B visas or a 50% tariff, including a 25% additional levy for buying Russian oil, experts said.

That will hurt the current account balance—the difference between a country’s exports and imports of goods and services, along with transfer of funds.

“A majority of the net services export income comes from IT services that India provides,” according to Madan Sabnavis, chief economist, Bank of Baroda. “There are also remittances that those employed abroad do to send money to India, and if IT companies are deterred from sending Indians abroad to work on these visas, the remittances can drop.”