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Study Abroad: How a falling rupee hurts Indian students

June 18, 2013 12:20 IST

Study Abroad: How a falling rupee hurts Indian students

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With the Indian rupee falling almost 7 per cent against the US dollar since January 2013, Indian students in universities abroad or those planning to go abroad this year will have to increase their budget by at least 10 per cent compared to what it would have been late last year.

As much as the falling rupee has brought cheers to some segment of Indians it is leading to a harrowing time for Indian students abroad and their parents back here. Here's a look at what aspects of students could get affected if the rupee's free fall continues.

First it's good to be clear how the rupee-dollar exchange mechanics apply to your pockets. When rupee decreases in value you have to shell out more of it to buy a given set of items with it. Take this illustration:

Price of a camera in US is $500

When $ 1 = Rs 50 you spend Rs 25,000

When $ 1= Rs 58 you need to spend Rs 29,000, that is, an additional Rs 4,000.

Thus the rupee going downhill is bad for those who need to convert rupees into dollars -- families of students abroad, importers, and foreign travellers from India.  The rupee has fallen about 7 per cent from the start of the year when it was at Rs 55 level to Rs 58 levels as of now.

Students in the US whose funding comes from India, from families or a loan, should be prepared to arrange for more funds since the amount they have planned based on previous calculations when the rupee was at a higher level might fall short now. Below is a list of expenses a student abroad would encounter:

The author is director at Fintotal Insights and Resources Pvt Ltd. He can be reached at info@fintotal.com.

Courtesy:


Photographs: Rediff Archives

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Tuition fee

This varies between $ 10,000 to $ 30,000 a year depending on the type of college (state college, private college), its popularity, course undertaken and so on. For those whose academic year starts in the August-December period will have to shell out approximately 10 per cent more.

Taking an average number $ 20,000, parents need to be prepared to spend Rs 60,000 more on just the tuition fee.


Photographs: Yuriko Nakao/Reuters
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Living costs

Living expenses including stay, food, travel, clothing, books and some entertainment can be estimated to $ 10,000 to $ 12,000 a year. If you take a monthly average of $ 850, expenses have increased by Rs 2,550 every month from Rs 46,750 to Rs 49,300 now.

Families of students abroad would have to send additional money to take care of their child's expenses.

Students who have taken education loan from India will be forced to calculate the shortfall and increase their borrowing to make up for it.


Photographs: Romeo Ranoco/Reuters
Tags: India

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Other expenses

Students studying in US universities require medical insurance which can range between $ 300-500 per year. If you plan to visit home this year you need air ticket which can cost $ 500-2,000 depending on when you book the ticket.

For students planning to go abroad for US education this year, admission cost will also have to be considered. According to one agency, application cost ranges from $ 50-150 per university and entrance tests costs $ 100-200.

Add to it test score reporting charges and courier charges of $ 50. In all, students spend $ 300 on average per university for the admission process, now with falling rupee this expense will increase by approximately Rs 1000.


Photographs: Mario Anzuoni/Reuters
Tags: US

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Students finishing education

This set of students might have reason to relax because they can hope to find jobs and send money home. Dollars earned will convert to higher amount of rupees if the rupee continues to be weak, which is likely to be the case, for some more time, experts believe.

What's causing rupee's fall?

This time rupee’s fall is not due to huge outflow of foreign institutional investor (FII) money from the capital market. In fact we've had record inflow of FII funds in the past few months.

The rise of the dollar can mainly be accounted to the fact that globally investors perceive US economy to be picking up steam.  The US economy is in better shape compared to European and Japanese economies, which are still struggling so the dollar is increasingly being viewed as 'safe haven'. With investors flocking to the US dollar its demand has increased, sending its value northwards.

This trend is expected to continue for a while. Any reversal can be expected only if some economic factors in our country are able to prop the rupee higher.

Summary

Students who are studying in universities abroad or are planning to go abroad this year will have to revise their budget. It is likely to see a hike of at least 10 per cent compared to what it would have been late last year.

For students taking education loan, these additional expenses mean their loan quantum will have to be increased. For already sanctioned loans they might have to go for a top-up loan. Of course this means they will have to pay back a much bigger amount, even a difference of lakhs of rupees for some, post their foreign education. For other students, their parents would have to dig deeper, perhaps into their savings, to fulfill their child’s dream education.

Compared to European countries, though job situation in the US is said to have improved, so the chances of Indian students landing proper jobs in these countries is still bleak. Students planning to pursue education abroad in such countries at this juncture should think twice or thrice before proceeding.


Photographs: Courtesy, University of Minnesota
Tags: FII , US

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