NRI send home record INR 8 Lakh crores in 2022
Indian migrant taking advantage of the depreciation of the Indian rupee against the US dollar (10 per cent between January and September 2022) increased the remittance flows to India in 2022.
A World Bank report published last week revealed that remittance flows to India from its migrant workers reached a record INR 8 LAKH Crores ( USD 100 billion ) for the year. Remittance growth in 2022 was 12% from a year earlier which was 7.5 %.
The second best remitters were from Mexico (USD 60 billion) followed by China (USD 51 billion), the Philippines (USD 38 billion), Egypt (USD 32 billion) and Pakistan (USD 29 billion). Such foreign remittances made up almost 3 per cent of India’s GDP.
While remittances to India is projected to increase 12 per cent, Nepal’s will only grow 4 per cent and the remaining countries (Including Sri Lanka, Pakistan and Bangladesh) is expected to see an aggregate decline of about 10 per cent.
It is also seen that there has been a gradual shift in Indian migrants’ key destinations from largely low-skilled, informal employment in the Gulf Cooperation Council (GCC) countries to a dominant share of high-income countries like the United States, United Kingdom and Asia-Pacific countries such as Singapore, Japan, Australia and New Zealand.
Between 2016-17 and 2020-21, the share of remittances from the United States, United Kingdom, and Singapore increased from 26 per cent to over 36 per cent, while the share from the 5 GCC countries (Saudi Arabia, United Arab Emirates, Kuwait, Oman, and Qatar) fell from 54 to 28 per cent.
With a share of 23 per cent of total remittances, the United States surpassed the United Arab Emirates as the top source country in 2020-21. About 20 per cent of India’s emigrants are in the United States and the United Kingdom.
According to the US Census, of the approximately 5 million Indians in the United States in 2019, and the Indian diaspora in the United States is highly skilled with 43 per cent of Indian-born residents of the United States had a graduate degree, compared to only 13 per cent of US-born residents.
The structural shift in qualifications and destinations has accelerated growth in remittances tied to high-salaried jobs, especially in services. During the pandemic, Indian migrants in high-income countries worked from home and benefitted from large fiscal stimulus packages. Post-pandemic, wage hikes and record-high employment conditions supported remittance growth in the face of high inflation.
Secondly, the economic conditions in the GCC (30 per cent share of India’s remittances) also played out in India’s favour. The majority of the GCC’s Indian migrants are blue-collar workers who 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.
Growth in remittances is expected to moderate to 2 per cent in 2023, as GDP growth in high-income countries continues to slow. Downside risks remain substantial, including a further deterioration of the war in Ukraine, volatile oil prices and currency exchange rates, and a deeper-than-expected downturn in major high-income countries. For South Asia, remittance flow is predicted to slow to 0.7 per cent.
Remittance costs remained high during the second quarter of 2022, at twice the Sustainable Development Goal (SDG) target of 3 per cent. According to the World Bank’s Remittance Prices Worldwide Database, the global average cost of sending USD 200 was 6 per cent in the second quarter of 2022, not very different from a year previous. Among developing country regions, the cost was lowest in South Asia, at about 4.1 per cent, while Sub-Saharan Africa continued to have the highest average cost, about 7.8 per cent.
Migrant workers play an important role in the economy of their host country and this is something the World Bank feel is important and that host countries should have policies to help them.
“Migrants help to ease tight labour markets in host countries while supporting their families through remittances. Inclusive social protection policies have helped workers weather the income and employment uncertainties created by the COVID-19 pandemic. Such policies have global impacts through remittances and must be continued,” said Michal Rutkowski, World Bank Global Director for Social Protection and Jobs.