- In a recent forecast, the World Bank (WB) stated that remittance to India is set to cross the $100-billion mark in 2022.
- In its Migration and Development Brief, the World Bank has said India’s remittance will grow 12 percent from 7.5 percent last year, resulting in $100 billion flow as compared to $89.4 billion in 2021.
- Percentage of GDP:
- Despite reaching a historic milestone at $100 billion and retaining its position as the top recipient of remittances globally, India’s remittance flows are expected to account for only 3 percent of its GDP in 2022.
- Remittances flow to South Asia:
- Led by strong performances in India and Nepal, the WB has predicted that this year will grow 3.5 percent to reach $163 billion in 2022.
- The overall remittance growth in South Asia reflects a disparity in individual country results
- While India has gained 12 percent and Nepal 4 percent, other countries have reported an aggregate decline of 10 percent.
- The report also says that despite global challenges in 2022, remittances to low- and middle-income countries will grow by 5% to $626 billion.
- Reason: This is, however, a slowdown from the 6.7 percent gain of 2021, reflecting the impact of an amalgam of external global shocks (inflation, slowing demand) in destination and source countries alike, as well as domestic factors.
- Reason for this rise:
- The large share of Indian migrants earning relatively high salaries in the United States, United Kingdom and East Asia.
- There’s been a gradual shift in destinations for Indian migrants.
- Migrants moved from largely low-skipped, informal employment in the Gulf Cooperation Council (GCC) countries to a dominant share of high-skilled jobs in high-income countries such as the United States, the United Kingdom, and East Asia (Singapore, Japan, Australia, New Zealand).
- A structural shift in qualifications helped them move into the highest-income-earner-category, especially in services.
- Higher education mapped onto high income levels with direct implications for remittance flows.
- During the Covid-19 pandemic, Indian migrants in high-income countries benefited from work-from-home and large fiscal stimulus packages.
- As the pandemic eased, the wage hikes and “record-high employment conditions” helped migrants send money home despite high global inflation.
- Despite Indian migrants in the Gulf Cooperation Council returning to India during the pandemic, price support policies kept inflation at bay and demand for labour increased with higher oil prices, which in turn increased remittances for Indian labourers.
- Depreciation of the Indian rupee to the US dollar — it fell 10 percent between January and September 2022 — proved to be advantageous for Indian migrants and increased remittance flows.
- In 2022, vaccinations and the resumption of travel helped migrants resume work, increasing remittance to the country.
- Global remittance: What’s predicted in 2023:
- The growth of remittance flows into South Asia in 2023 is expected to slow to 0.7 percent.
- The year will stand as a test for the resilience of remittances from white-collar South Asian migrants in high-income countries.
- Remittance flows in India, specifically, are predicted to decrease due to inflation and an economic slowdown in the United States.
- Decline in economic growth in the GCC coupled with a fall in oil prices will further pull remittance flows down to all South Asian countries, the report states.
- The sum of worker’s remittances, compensation of employees, and migrants’ transfers as recorded in the IMF Balance of Payments. Workers remittances are current transfers by migrants who are considered residents in the source.
- Remittances are a vital source of household income for low- and middle-income countries.
- Money sent home by migrants is one of the largest financial inflows to developing countries.
- Workers’ remittances are a significant part of international capital flows, especially with regard to labour-exporting countries.
- Remittances can provide the receiving countries with much-needed foreign exchange.
- Remittances are a more stable and reliable form of foreign earnings in many developing countries in comparison to FDI or international aid.
- It helps in alleviating the Balance-Of-Payments (BOP) and the debt crisis of such countries.
- Remittances are a stabilising factor for national currencies of developing countries.
- Remittances are helping to meet families’ increased need for livelihood support.
- As COVID-19 still devastates families around the world, remittances continue to provide a critical lifeline for the poor and vulnerable.
- Growing significance of remittances as a source of external financing for low- and middle-income countries, there is a need for better collection of data on remittances, in terms of frequency, and timely reporting.
- Supportive policy responses, together with national social protection systems, should continue to be inclusive of all communities, including migrants.
- The World Bank is assisting member states in monitoring the flow of remittances through various channels, the costs and convenience of sending money, and regulations to protect financial integrity that affect remittance flows.
- It is working with the G20 countries and the global community to reduce remittance costs and improve financial inclusion for the poor.