Economy / Balance of Payments / Remittances to India: Key Points
Remittances to India: Key Points
- Global Leadership:
- India has consistently been the largest recipient of remittances globally for several years.
- In 2019, India received about $83 billion in remittances, maintaining its position as the top remittance-receiving country.
- Impact of the Pandemic:
- In 2020, remittances to India were expected to decline by nine percent to USD 76 billion due to the impact of the ongoing COVID-19 pandemic and the global economic recession.
- Regional Distribution:
- A significant portion of remittances is concentrated in specific states, with approximately 58.7 percent received by four states: Kerala, Karnataka, Maharashtra, and Tamil Nadu.
- Kerala, in particular, receives a substantial share of remittances, followed by Maharashtra, Karnataka, Tamil Nadu, and New Delhi.
- State-wise Breakdown (Financial Year 2016-17):
- Kerala: Highest share of remittances.
- Maharashtra: Second-highest share.
- Karnataka: Significant contribution.
- Tamil Nadu and New Delhi: Also receive notable remittance inflows.
- Contributing Countries:
- Remittances from seven countries constitute 82 percent of the total. These countries include the UAE, the US, Saudi Arabia, Qatar, Kuwait, the UK, and Oman.
- Indian Diaspora and GCC Countries:
- Indians working in the Gulf Cooperation Council (GCC) countries, comprising mostly semi-skilled and unskilled workers, contribute more than 50 percent of total remittances.
- Factors Contributing to Remittance Increase:
- A prosperous Indian diaspora sending money home.
- Reduction in bureaucratic hurdles.
- High-interest rates.
- RBI increasing the remittance limit.
- Weakening of the rupee against the dollar, encouraging higher remittances.
- Role in Stabilizing Current Account:
- Remittances play a crucial role in stabilizing India's current account, especially during periods of economic uncertainty.
- Impact of COVID-19:
- The global economic contraction and the return of many Indians working abroad due to the pandemic led to a temporary decline in remittances.
- Government Measures:
- Progressive reduction of bureaucratic processes.
- Relaxation of controls.
- RBI's efforts to facilitate higher remittance limits.
Understanding the dynamics of remittances is essential for assessing their impact on the Indian economy, particularly in terms of foreign exchange inflows, regional economic disparities, and the overall balance of payments.
