MUMBAI/NEW YORK – The patriotism of wealthy overseas Indians has helped the country avert economic crises in the past and it is little surprise that embattled policymakers are turning to them again to plug a record trade gap that is battering the rupee. This time, though, big investors among the more than 25-million overseas Indian community - the world's second-largest Diaspora - are staying away as the economic outlook darkens and political instability looms ahead of national elections. Shoring up inflows from the overseas Indians is a key weapon in Finance Minister P. Chidambaram's arsenal to prop-up the rupee that has lost 20 percent against the dollar so far this year and which dropped to a record low on Wednesday. The rupee's crash has boosted remittances, mainly from blue-collar workers overseas - particularly in the Gulf - who can get more rupees for hard currency. However, it has not triggered a surge in high-value investments in real estate, private equity funds and stock markets, bankers and wealth managers said. Underlining the hesitancy, flows from non-resident Indians (NRIs) into bank deposits in the April-June quarter dropped to $5.5 billion from $6.6 billion a year-earlier, central bank data shows. Investments in real estate by overseas Indians dropped about 30 percent in the fiscal year that ended in March, according to the Confederation of Real Estate Developers' Associations of India (CREDAI), an umbrella group of local property developers. "People feel like there are too many unknowns. The most recent government has been ghastly, and nobody quite knows what comes after it. I haven't been optimistic about India for quite a while," said Vasant Prabhu, chief financial officer of Starwood Hotels & Resorts Worldwide Inc in New York. "What makes it hard, you don't know what the bottom of the rupee is," he said in comments underscored by a rupee that stumbled from 63 per dollar on Friday to almost 69 per dollar on Wednesday - a sharp move over such a short period of time for a currency. His comments were echoed by wealth managers and bankers in Britain, the United States and India who said non-resident Indian clients saw too many uncertainties despite the tantalizing prospect of buying assets with a record-low rupee. Economic growth is at its weakest in a decade and seen slowing further, New Delhi is struggling to close a record deficit in the current account - the broadest measure of a country's international trade - and a national election that must be held by May could tempt the government to spend to win over voters and so undermine its fiscal discipline. In addition, emerging markets are losing favor with investors generally as the prospect of the United States reining in its economic stimulus draws cash into US assets. — Reuters
