India’s Remittance Inflows Growth in 2023

What’s in today’s article?

• Why in news?
• Remittances
• News Summary: India’s remittance inflows growth could slow to just 0.2% in 2023
• Why are remittances expected to grow at a slower pace in 2023?
• What are the top sources of remittances for India?
• What was the trend for remittances in 2022?

 

Why in news?

• According to the World Bank’s latest Migration and Development Brief, India is expected to post a growth of just 0.2% in remittance inflows in 2023.
  • The Migration and Development Brief is a publication issued by the World Bank.
  • It provides updates and analysis on global trends in migration and remittances.
  • It also focuses on increasing the volume of remittances as a percentage of GDP, reducing remittance costs, and reducing recruitment costs.
• Slower growth in OECD and GCC economies, high base effect are few reasons behind this slowdown.

 

Remittances

• About
  • RBI defines remittances as the transfer of money by an individual who is a resident of one country to an individual or entity in another country. 
  • Remittances generally involve migrant workers who send money back to their home countries to support their families or for other purposes.
  • The RBI regulates remittance transactions and has put in place guidelines and regulations to govern the process. 
  • Authorized dealers, such as banks and other financial institutions, facilitate these remittance transactions in compliance with the RBI's regulations.
• Importance
  • In the aftermath of the Covid-19 pandemic, remittances are being viewed as a critical financial inflow.
  • It is an important source of foreign exchange for several countries including those in South Asia.
  • Remittances are highly complementary to government cash transfers and essential to households during times of need.
  • In India, the largest global recipient, remittances represented only 3.3% of GDP in 2022.

 

News Summary: India’s remittance inflows growth could slow to just 0.2% in 2023

Why are remittances expected to grow at a slower pace in 2023?

• Slower growth in OECD economies
  • Slower growth in OECD economies — especially in the high-tech sector in the United States has affected the demand for information technology (IT) workers.
    • OECD is an intergovernmental organisation with 38 member countries.
    • It was established in 1961 to stimulate economic progress and world trade.
    • The majority of OECD Members are ranked as very high in the Human Development Index, and are regarded as developed countries.
  • It could lead to a diversion of formal remittances toward informal money transfer channels.
• Lower demand for migrants in the Gulf Cooperation Council (GCC) countries
  • A lower demand for migrants in the Gulf Cooperation Council (GCC) countries, is another key contributing factor.
  • GCC is a grouping of six Arab nations located around the Arabian Gulf where declining oil prices have dented growth.
    • Six countries are – Bahrain; Kuwait; Oman; Qatar; Saudi Arabia; United Arab Emirates (UAE).
• High Base effect
  • In 2022, India registered a growth of more than 24% to reach a record-high $111 billion in remittances in 2022.
  • The high base in 2022 will significantly affect the growth rate of remittances for India in 2023.

 

What are the top sources of remittances for India?

• Almost 36% of India’s remittances are from the high-skilled and largely high-tech Indian migrants in three high-income destinations — the US, United Kingdom, and Singapore. 
  • The post-pandemic recovery led to a tight labour market in these regions, and wage hikes boosted remittances.
• Remittance inflows from the GCC countries account for about 28% of India’s total remittance inflows.
  • High energy prices favoured employment and incomes of the less-skilled Indian migrants in the GCC countries.
  • At the same time, the GCC governments’ special measures to curb food price inflation shielded migrants’ remitting potential.

 

What was the trend for remittances in 2022?

• In 2022, India posted more than 24% growth in its inward remittances to reach $111 billion, higher than the World Bank’s earlier estimate of $100 billion. 
  • This represented 63% of South Asia’s remittance flows.
• The top five recipient countries for remittances in 2022 were India ($111 billion), followed by Mexico ($61 billion), China ($51 billion), the Philippines ($38 billion), and Pakistan ($30 billion).
• Remittances were supported by: 
  • the oil surge in member countries of the GCC, which increased migrants’ incomes; 
  • large money transfers from the Russian Federation to countries in Central Asia; and 
  • the strong labour market in the US and the OECD countries.

• 

 

Image caption: Where the money has flowed

 

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Q1) What is Migration and Development Brief?

The Migration and Development Brief is a publication issued by the World Bank, providing updates and analysis on global trends in migration and remittances. The brief focuses on the relationship between migration and development, with particular attention to the economic and social impacts of remittances.The Migration and Development Brief offers insights into key topics related to international migration, such as migration flows, migrant remittances, policy developments, and their implications for development. It presents data, research findings, and policy recommendations to inform policymakers, researchers, and other stakeholders about the dynamics and potential benefits of migration.

 

Q2) What is Gulf Cooperation Council (GCC)?

The Gulf Cooperation Council (GCC) is a regional political and economic organization consisting of six Arab states in the Arabian Peninsula. It was established on May 25, 1981, with the aim of promoting cooperation and integration among its member countries. Six member countries of GCC are – Bahrain; Kuwait; Oman; Qatar; Saudi Arabia; United Arab Emirates (UAE).

 

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Source: Why remittance inflows growth could slow to just 0.2% in 2023 | ReliefWeb | OECD