DUBAI : Remittance flows to India are estimated to grow 12% to reach $100 billion for the first time this year— way ahead of Mexico, China and Philippines— according to World Bank’s Migration and Development brief, helping India retain the top position.
The multilateral body said that several longer- and short-term trends that were obscured by the pandemic were catalytic in spurring remittance flows to India. It pointed out remittances have benefitted from a gradual structural shift in Indian migrants’ key destinations — from largely low-skilled, informal employment in Gulf countries to a dominant share of high-skilled jobs in high-income countries such as the US, the UK, Singapore, Japan, Australia & New Zealand.
At $100 billion, remittances from Indians overseas will be 25% higher than FDI flows, which the government estimated will reach around $80 billion this year.Between 2016-17 and 2020-21, the share of remittances from the US, the United Kingdom and Singapore increased from 26% to over 36%, while the share from the five GCC countries (Saudi Arabia, UAE, Kuwait, Oman, and Qatar) dropped from 54% to 28%,” the World Bank said.
In 2020-21, the US had surpassed the UAE as the top source country, with a share of 23% of total remittances. Citing the US Census, it said that of the approximately five million Indians in the US in 2019, about 57% had lived in the nation for more than 10 years.
Elaborating further, the report said that during this time, many earned graduate degrees that groomed them to move rapidly into the highest-income-earner category.
Remittances are seen as a crucial source of foreign exchange. At $100 billion, remittances from Indian workers overseas will be 25% higher than the FDI flows, which the government estimated will reach around $80 billion this year. The money that workers send home will also help close some of the gap created by a higher trade deficit, which is the gap between imports and exports.
Thanks to high oil and other commodity prices, imports have soared at a faster pace than exports this year. The report said that the structural shift in qualifications and destinations has accelerated growth in remittances tied to high-salaried jobs, especially in services.
“During the Covid-19 pandemic, Indian migrants in high-income countries worked from home and benefited from large fiscal stimulus packages. Post pandemic, wage hikes and record-high employment conditions supported remittance growth in the face of high inflation,” it said.
Besides, the economic conditions in Gulf countries, which accounts for nearly a third of the remittances, played out in India’s favour as a majority of migrants, who are blue-collar workers, returned home during the pandemic.
“Vaccinations and the resumption of travel helped more migrants to resume work in 2022 than in 2021. GCC’s price support policies kept inflation low in 2022, and higher oil prices increased demand for labour, enabling Indian migrants to increase remittances and counter the impact of India’s record-high inflation on the real incomes of their families,” according to the report.
Further, the depreciation of the rupee against the dollar may have resulted in increased remittance flows.