In 2023-24, Advanced Economies like the US, UK, Singapore, Canada, and Australia contributed over half of India’s total remittances, surpassing the Gulf nations as per Reserve Bank of India’s (RBI’s) latest Remittances Survey.
- Historically, the six GCC nations—Saudi Arabia, UAE, Qatar, Oman, Bahrain, and Kuwait—were top sources of remittances to India due to the high number of Indian migrant workers there.
About Remittances
- Remittances refer to money transfers made by individuals working abroad to their home country.
- Regulatory Framework
- The Foreign Exchange Management Act (FEMA), 1999, governs all foreign exchange transactions in India.
- Under the Liberalized Remittance Scheme (LRS), a provision of FEMA, Indian residents can remit up to USD 250,000 per year for personal and investment purposes.
- Remittances are classified under the current account of the Balance of Payments (BoP) as unilateral transfers, signifying foreign income inflows without liabilities.
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Impact of remittances on Economic Stability and Development
- Balance of Payments: Remittances help stabilize the current account and reduce trade deficits.
- Foreign Exchange Reserves: Steady remittance inflows strengthen foreign exchange reserves, contributing to economic resilience.
- Boosts Household Income: Improves the standard of living and supports education and healthcare.
- Encourages Investments: Facilitates small businesses and real estate investments.
- Enhances Financial Inclusion: Promotes banking penetration and access to formal financial systems.
Decline in Gulf Remittances: Key Factors
- Impact of Covid-19: The pandemic led to job losses and salary cuts, reducing funds available for remittances.
- Nationalisation Policies: Programs like Saudi Arabia’s Nitaqat prioritize local hiring over foreign workers, limiting opportunities for Indian migrants.
- Sharp Drop in Gulf Contributions
- UAE’s share fell from 26.9% (2016-17) to 19.2% (2023-24)
- Saudi Arabia: 11.6% → 6.7%
- Kuwait: 6.5% → 3.9%
Rise in Remittances from Advanced economies: Reasons
- Skilled Professionals Driving Growth: Rising numbers of Indian professionals in STEM, finance, and healthcare are fueling remittance growth from advanced economies.
Rising Shares from Other Advanced Economies:
- US Leads in Remittances: The US remained the top source, contributing 27.7% of India’s total remittances in 2023-24, up from 22.9% in 2016-17 and 23.4% in 2020-21.
- UK: Increased from 3% to 10.8%
- Canada: Rose from 3% to 3.8%
- Singapore: Went up from 5.5% to 6.6%
(2016-17 to 2023-24)
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- High Earnings in Advanced Economies: Indian professionals in countries like Canada, UK, Germany, and Australia earn significantly more than those in the Gulf, boosting remittance volumes.
- Emerging Corridors Need More Study: Recent research highlights growing remittances from India-Germany, India-Austria, and India-Netherlands corridors — more research is needed to understand these evolving trends.
Suggestions to Boost Remittances
- Boosting Remittance Inflows: India should focus on skill harmonisation at the sending-country level to maximise remittance inflows and enhance migrant workers’ welfare.
- Engaging Destination Countries: Proactive engagement with host nations can secure opportunities and sustain remittance flows.
- Unlocking Migrants’ Earning Potential: Ensuring that migrants can fully use their skills will enhance their income and remittance contributions.
- Leverage Mobility Agreements: Bilateral and multilateral agreements can help regulate migration, prevent underemployment, and secure better jobs for Indian workers abroad.
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