According to the recently released survey of RBI’s remittance survey 2023-24, advanced economies(AE) led by the US, UK, Canada, Singapore, and Australia have overtaken Gulf Cooperation Council (GCC) countries as the top source of remittances to India. Go through the article to know about the Remittance Landscape of India.
What are Remittances?
Remittances are the funds or finances, or goods that migrants (living abroad) send back to their families in their home country to provide financial assistance. They constitute an important source of income and foreign exchange for many developing countries, especially those in South Asia.
Declining Gulf Dominance in Remittances
(a) Traditional role of GCC nations: Historically dominant due to large numbers of low-skilled Indian migrant workers.
(b) Major contributors: UAE, Saudi Arabia, Kuwait, Qatar, Oman, Bahrain.
(c) Reasons for decline: COVID-19 impact: Job losses, salary cuts, and return migration. GCC nationalisation policies: Saudi Arabia’s “Nitaqat” (Saudisation) – preference for local over foreign labor.
(d) Statistical trends: UAE: Remittances fell from 26.9% (2016-17) to 19.2% (2023-24). Saudi Arabia: ↓ from 11.6% to 6.7%. Kuwait: ↓ from 6.5% to 3.9%.
Rise of Advanced Economies in Remittances
Major contributors: United States: Largest share – accounting for 27.7% of total remittances in 2023-24, up from 22.9% in 2016-17.
Others: UK: ↑ from 3% to 10.8%. Singapore: ↑ from 5.5% to 6.6%. Canada: ↑ from 3% to 3.8%.
Reasons for consistent remittance inflow
Strong Economic Conditions:
(a) In the US, UK, and Singapore, lower inflation and strong labour markets have benefited skilled Indian professionals. As a result, we can see increased remittance inflows to India.
(b) High employment growth and a general decrease in inflation in Europe contributed to the increase in remittances worldwide.
Diversified Migrant Pool:
(a) India’s migrant pool is no longer concentrated solely in high-income countries. A significant portion resides in the Gulf Cooperation Council (GCC), offering a buffer during economic downturns in either region.
(b) Favorable economic conditions in the GCC, including high energy prices and curbed food price inflation, have positively impacted employment and incomes for Indian migrants, especially those in less-skilled sectors.
Improved Remittance Channels:
(a) One of the most successful steps in the form of UPI (unified payment interface) led to real-time fund transfers, allowing the easy flow of money instantly.
(b) Today, countries like the USA, Qatar, Oman, Hong Kong, Canada, Singapore, Australia, and many more are leveraging this UPI system as the National Payment Corporation of India has allowed them.
How can Remittance Inflow in India be Increased?
- Boosting Financial Inclusion: World Bank data indicates that only 80% of Indians have bank accounts. Easier remittance transfers can be seen through a wider network of bank branches, ATMs, and digital platforms, provided that the expansion of formal financial services.
- Reducing Remittance Costs: As per World Bank data, India has high remittance costs (5-6%). Introducing competition between remittance service providers and promoting digital channels can lower transaction costs, while government incentives for formal channels can boost adoption.
- Enhancing Remittance Infrastructure: Upgrading payment systems and leveraging new technologies like blockchain can streamline the remittance process. The Reserve Bank of India’s Centralized Payment System, such as Real Time Gross Settlement (RTGS) and National Electronic Funds Transfer (NEFT), is a step towards this goal.
- Targeted Diaspora Engagement: Pravasi Bharatiya Divas and the Know India Programme have a major role to play in strengthening connections, as the government engages with the indian diaspora through these initiatives. Offering attractive investment options and tax breaks can incentivize higher remittance inflows.
- Promoting Economic Stability: Sound macroeconomic policies, improved the ease of doing business, and addressing corruption are crucial here. As it will enhance diaspora confidence, which will eventually more remittance flows.
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Conclusion
The Remittance Landscape of India is undergoing a major transformation, shifting from low-skilled Gulf migration to high-skilled migration to AEs. Proactive migration diplomacy, education policy reforms, as well as labor market alignment, are critical for sustaining and optimising this vital source of foreign exchange and socio-economic development
We hope this information about the ‘Remittance Landscape of India’ will help you understand the position and strength of developing India.