Remittances to touch $160 bn in 2029: RBI

India is set to become the top global labor supplier  due to its growing working-age population, which will continue to rise until 2048. 

It will drive remittances up to about $160 billion by 2029, compared to $115 billion in 2023, according to the RBI’s latest Report on Currency and Finance.

Current Status

• India is the top recipient of remittances globally, making up 13.5% of the world total.

• Increasing Importance of Remittances

  • GDP Ratio: The ratio of remittances to India’s GDP has risen from 2.8% in 2000 to 3.2% in 2023.
  • Comparison: This ratio is higher than the ratio of foreign direct investment (FDI) inflows to GDP, which is 1.9% in 2023.
    • This indicates a strengthening of India’s external sector.

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About Remittance

• A remittance is money sent home by workers abroad, members of diaspora communities, or citizens with family ties overseas. 
  • This money is used to support household income in the sender’s home country and is a major financial inflow for developing nations.
• Importance: Remittances are a significant source of international capital, often rivaling international aid in financial importance for labor-exporting countries.
• India’s Position: India consistently tops the list of remittance-receiving countries due to its large diaspora.
  • Annual Remittances: In FY21, remittances to India totaled $87 billion, which was 2.75% of India’s GDP.
  • Top Sources: The UAE, USA, and Saudi Arabia are the leading sources of remittances to India.
  • Top Destinations: Bangladesh, Nepal, and Sri Lanka are the primary countries receiving remittances from India.

Challenges and Considerations

• Cost of Remittances: Sending money internationally can be costly. It  can be even higher for remote destinations.
• Security and Regulation: There are concerns about remittances being used for illegal activities such as terrorism or money laundering. 
  • Despite advancements in digital transfers, some funds still move through less transparent channels.
• Technological Advances: Fintech companies like Payoneer and Wise are lowering remittance fees. 
  • Modernizing infrastructure and implementing regulations can improve financial inclusion and safety.

Factors Affecting Remittance Cost

• Digitalization: Using technology for money transfers can make the process faster, more transparent, and cheaper.
• Transfer Method: How the money is sent (cash, bank transfer, etc.) and where it’s sent from (bank, online, agent) affects the cost.
• Competition: Having many companies offering money transfer services can help keep costs low.

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• Benefits of Digital Remittances
  • Faster Transfers: Online systems allow money to be sent quickly.
  • More Transparency: Digital transactions are easier to track and understand.
  • Lower Costs: Online services often have lower fees than traditional methods.

Status and Contribution of Indian workers 

• Large Migrant Workforce: India has a significant number of people living and working in other countries.
• Gulf Dominates: Most of the money sent back to India comes from countries in the Middle East.
• North America : The United States and Canada also contribute a significant amount to India’s remittances.
• Key Factors Impacting Demand for Indian Migrant Workers
  • High Global Demand: There’s a continued strong international need for Indian workers across various sectors.
  • Skill Upgradation: Improving the skills of Indian workers is further boosting their appeal to foreign employers.

Ways to Enhance Remittance Inflow in India

• Boost financial inclusion: 
  • Expansion of banking services: By increasing the bank branches, ATMs, and digital platforms in rural areas can make remittance transfer more easy.
  • Promote mobile banking: There should be encouragement for using mobile banking and digital wallets to ease the sending and receiving the remittance. 
• Transaction cost:
  • Low fee: By decreasing the fee imposed by banks and money transfer operators, the formal remittance channel can be more attractive. 
  • Rise in competition: Foster competition in service providers to decrease cost and enhance quality of services. 
• Enhance security measures: 
  • Fraud prevention: Implement various measures to prevent fraud and security of remittance transactions. 
  • Customer support: Offer reliable customer support services to address issues and various concerns.
• Encourage Investment in Home countries: 
  • Investment opportunities: Offer various attractive investment opportunities for diaspora to invest in their home nation including bonds, real estate, and local business. 
  • Incentive program: Develop incentive programs for diaspora investors such as tax benefits and special investment schemes. 
• Strengthen ties with financial Institutions: 
  • Partnership with banks: Forge partnership between Indian banks and international financial institutions to facilitate smooth remittance process. 
  • Remittance service: Establish remittance service within banks  to cater the needs of remittance sender and receiver. 

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