Syllabus: GS3/ Economy
Context
- Outward remittances by resident individuals under the Reserve Bank of India’s Liberalised Remittance Scheme (LRS) fell nearly 11% year-on-year in July 2025, totalling $2,452.93 million against $2,754.05 million in the same period last year.
What are Remittances?
- Remittances are a way to electronically send funds to people, often family, in another country.
- Usually sent by individuals working in foreign countries, especially those employed in blue-collar or skilled jobs.
- Remittances are a significant source of income for many countries, contributing to their economic stability, supporting local economies, and sometimes helping to finance national trade deficits.
- Modes of Transfer: Remittances can be sent through banks, money transfer operators, or digital platforms.
- Outward Remittance: Outward remittance refers to the transfer of money in foreign currency by a resident of India to a person or entity outside India, for purposes such as education, travel, medical treatment, investment, or gifting.
| India’s Remittances: Key Facts – India’s remittances have more than doubled from $55.6 billion in 2010-11 to $118.7 billion in 2023-24. – As per the World Bank, India has been the top recipient of remittances since 2008, with its share in world remittances rising from around 11 per cent in 2001 to about 14 percent in 2024. – Remittances from the U.S. and U.K. nearly doubled to 40% of total inward remittances in FY24, up from 26% in FY17. – The U.S. became the top source of remittances in FY21, contributing 23.4% followed by the UAE contributing 19.2%. – Half of the remittances went to Maharashtra, Kerala, and Tamil Nadu. Other states like Haryana, Gujarat, and Punjab had smaller shares (below 5%). |
Why did student remittances decline?
- Global Visa Restrictions: Major destinations like US, UK, Canada saw 25–31% declines in Indian student visas.
- Economic Uncertainty: Families postponed study and travel plans due to global financial volatility.
- High Base Effect: Remittances were at peak levels in FY24, making a decline statistically likely.
| What is the Liberalised Remittance Scheme (LRS)? – LRS was introduced in 2004 by the Reserve Bank of India (RBI). – It allows resident individuals (including minors) to remit up to $250,000 per financial year for permissible current or capital account transactions. – Initially launched with a $25,000 limit, later increased to current levels. – Remittances can be made for; 1. Education and studies abroad, 2. Travel and tourism, 3. Medical treatment abroad, 4. Purchase of property, 5. Investment in foreign securities or businesses. – LRS is governed under the Foreign Exchange Management Act (FEMA), 1999. |
Source: TH
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