Recently, The Reserve Bank of India’s Sixth Round of India’s Remittances Survey was released. 

What are Remittances?

• Remittances are money transfers sent by migrant workers to their families or relatives in their home countries.
• They play an important role in India’s external sector balance. 
• They act as a stabilizing force in times of global financial uncertainty.
• It is recorded under the current account of the Balance of Payments (BoP) as unilateral transfers. They represent foreign income inflows that do not create liabilities.
• India received a record $118.7 billion in 2023-24.
  • Remittances exceeded FDI inflows and covered over half of India’s trade deficit.

Key findings of the RBI’s Sixth Round of India’s Remittances Survey

• Structural Changes in Remittances
  • Changing Sources of Remittances
    • Earlier, most remittances came from Gulf Cooperation Council (GCC) countries. Now, more remittances come from advanced economies (AEs) like the U.S., U.K., Canada, Australia, and Singapore.
    • The U.S. alone contributes 27.7%, increasing from 23.4% in 2020-21.
    • AEs contribute 51.2% of total remittances, overtaking GCC nations, which contribute 37.9%.
  • Reason for This Shift
    • Earlier migration was dominated by low-skilled workers in the West Asian region.
    • Now, there is a shift toward high-skilled professionals and students in developed nations.
      • This reflects both macroeconomic changes and India’s growing skilled human capital export.
• Concerns in Remittance Trends
  • Concentration of Large-Value Transactions
    • In 2023–24, remittances exceeding ₹5 lakh made up 29% of total remittance value, despite accounting for only 1.4% of total transactions.
      • This indicates a growing reliance on high-value transfers, mainly from high-earning, professionally mobile Indians.
    • Although this shows that the Indian diaspora is doing well, it can be risky because changes in immigration rules in other countries might reduce the flow of money if they limit high-skilled workers from moving there. 
  • Shift Toward Digital Remittance Channels
    • Digital transactions accounted for 73.5% of all remittances in 2023–24.
    • The cost of sending $200 to India has dropped to 4.9%, below the global average of 6.65%, but still higher than the SDG (Sustainable Development Goal)target of 3%.
      • This progress is largely due to the growth of fintech platforms and mobile-based money transfer apps.
  • Uneven Digital Adoption Across Remittance Corridors
    • Some countries like UAE (76.1%) and Saudi Arabia (92.7%) use digital remittance methods heavily.
    • But migrants in Canada (40%), Germany (55.1%), and Italy (35%) still rely on traditional banking.
    • India needs to improve cross-border digital payments for faster and cheaper transfers.
  • Unequal Distribution of Remittances: Maharashtra, Kerala, and Tamil Nadu receive 51% of India’s total remittances, in contrast, Bihar, Uttar Pradesh, and Rajasthan receive less than 6%.
• Missing Data & Policy Needs
  • The survey does not provide data on how remittances are used by families.
  • This makes it unclear whether remittances are:
    • Used for daily expenses (consumption)
    • Invested in savings, real estate, or businesses (long-term growth)
  • Policy Recommendations
    • India needs savings-linked remittance products to encourage financial stability.
    • Financial literacy programs can help families use remittances more effectively.
    • Investment incentives can boost economic development in remittance-receiving households.