09 May 2024 India’s Remittances

THIS ARTICLE COVERS ‘DAILY CURRENT AFFAIRS’ AND THE TOPIC DETAILS OF ”India’s Remittances”. THIS TOPIC IS RELEVANT IN THE “Economy” SECTION OF THE UPSC CSE EXAM.

Why in the News?

In 2022, India topped the list of countries receiving the highest remittances, with over $111 billion, surpassing the $100 billion mark. Mexico, China, the Philippines, and France followed India. This achievement was noted in the World Migration Report 2024, unveiled by the United Nations International Organisation for Migration. 

The report highlights that international migration drives human development and economic growth. This is highlighted by a more than 650 per cent increase in international remittances from 2000 to 2022, rising from USD 128 billion to USD 831 billion. The growth continued despite predictions from many analysts that remittances would decrease substantially because of COVID-19.  

The report states that the US has consistently been the top remittance-sending country, with total outflows of $68bn in 2020, followed by the UAE ($43bn), Saudi Arabia ($34.6bn), Switzerland ($28bn), and Germany ($22bn). 

The report reveals that challenges persist while international migration drives human development. With an estimated 281 million international migrants worldwide, the number of displaced individuals due to conflict, violence, disaster, and other reasons has surged to the highest levels in modern-day records, reaching 117 million, underscoring the urgency of addressing displacement crises.  

The report added that nearly 18 million, or 1.3 per cent of the total population, are from India, the origin of the largest number of international migrants in the world. Large diasporas live in countries such as the United Arab Emirates, the United States, and Saudi Arabia. India came in 13th as the destination country for immigrants, with 4.48 million.

Significance of Remittances Inflow:

The inflow of remittances is the aggregate sum of funds sent into a country from abroad by citizens residing and employed in foreign nations. These remittances are financial contributions that migrants make to their home countries, often aimed at supporting their families or investing. 

Remittances play a crucial role in bolstering the economy of the recipient nation by enhancing consumer spending, elevating the quality of life, and fostering overall economic development. Multiple avenues exist for sending remittances, including wire transfers, remittance services, and electronic payment systems. Remittances significantly impact both sending and receiving countries’ economies. These are:

• • Economic Support: In many countries, remittances represent a consistent source of income from abroad, aiding in stabilising the balance of payments. This steadiness plays a critical role in offsetting the effects of economic disturbances, such as commodity price volatility. It serves as a safeguard against inflation and exchange rate variations. These significant amounts of money play a crucial role in the GDP of these countries, forming an essential source of revenue that fosters economic development. 
  • Poverty Alleviation: Remittances often serve as a lifeline for families in developing countries, helping them meet basic needs such as food, shelter, and education. By providing a stable source of income, they can significantly reduce poverty. 
  • Financial Inclusion: Remittance recipients often gain access to formal financial services such as banks, microfinance institutions, and digital payment platforms. This promotes financial inclusion, helps individuals build assets, and encourages saving and investment for the future. 
  • Diaspora Engagement: Remittances significantly enhance diaspora engagement, as they create a bridge connecting migrants with their countries of origin. This financial support fosters a sense of belonging and involvement and contributes to social unity, cultural exchanges, and the strengthening of diaspora communities. 
  • Forex Reserves: Remittances involve transferring foreign currency into a destination country. Migrants often send remittances back to their home countries. This process converts their earnings into their home country’s currency, directly boosting foreign exchange reserves. The increased foreign currency supply in the local market can help stabilize or improve the home country’s currency value, strengthening its Forex reserves. 

Remittances in India: 

The Indian diaspora, spread across different countries, is significant in sending remittances back to India. This includes individuals of Indian origin living and working abroad, including skilled professionals, workers, students, and entrepreneurs.

The primary sources of remittances to India include Indian expatriates working in countries like the United States, the United Arab Emirates, Saudi Arabia, and other Gulf nations. India came in 13th as the destination country for immigrants, with 4.48 million. 

The Organisation for Economic Co-operation and Development (OECD) comprises 38 countries with high-income democracies. These nations are key destinations for highly skilled and high-tech migrants from India, making up nearly 36% of India’s remittance income. According to the World Bank, the economic growth of these countries is anticipated to decrease from 3.1% in 2022 to 2.1% in 2023, with a slight increase to 2.4% in 2024. 

UPI allows instant fund transfers and remittances, cutting down the long processing times of traditional methods and giving recipients faster access to funds.  In January 2023, National Payments Corporation of India (NPCI) enabled NRIs in 10 countries to use UPI with their international numbers. These countries are Singapore, Australia, Canada, Hong Kong, Oman, Qatar, USA, Saudi Arabia, UAE, and the UK. 

CONCLUSION: 

Remittances are pivotal in enhancing a nation’s foreign exchange reserves, ensuring economic stability, promoting international trade and investment, and protecting against external shocks. They serve as a dependable source of foreign currency inflows, bolstering the financial resilience and sustainability of the recipient country. In India, remittances come from a wide array of sources, showcasing the varied contributions of the Indian diaspora, including skilled professionals, workers, students, entrepreneurs, and different organizations, all aiming to support families, invest in prospects, and aid in the nation’s economic growth.

Download Yojna daily current affairs eng med 9th May 2024

Prelims Practice Question: 

Q. Which of the following Gulf Countries sent the highest remittances to India?

A. Saudi Arabia

B. UAE

C. Kuwait

D. Qatar

ANSWER: B 

Mains Practice Question: 

Q. How do remittances affect the relationship between migrant workers and their home countries? How have digital payment platforms influenced remittance in India?

Amit Pradhan

I have the experience to guide and write the content for the  UPSC, and PCS Aspirants in preparing for the Civil Service Exam.  Currently Working as a content developer in Yojna IAS.