Remittances

India is expected to receive a record $100 billion in remittances in 2022, the top recipient this year.

The World Bank estimates that India’s remittances will increase by 12.5% from 7.5% last year, resulting in a $100 billion flow as opposed to $89.4 billion in 2021 in its Migration and Development Brief.

Why are remittances to India so high this year?
- There has been a “gradual shift in destinations” for Indian migrants, claims the World Bank.
- A “structural shift in qualifications” that enabled them to enter the “highest-income-earner category,”, particularly in the service sector, benefited.
- Higher-income levels are directly correlated with education, which has an impact on remittance flows.
- During the Covid-19 pandemic, Indian migrants in high-income countries benefited from work-from-home and large fiscal stimulus packages.
- Despite high global inflation, wage increases and “record-high employment conditions” helped migrants send money home as the pandemic subsided.
- Wage increases and a strong labour market in the United States and other OECD countries boosted remittances to India.
- Governments in GCC destination countries ensured low inflation through direct assistance measures that protected migrants‘ ability to remit.“

What are remittances?
- The World Bank defines it as “the sum of worker remittances, employee compensation, and migrant transfers as recorded in the IMF Balance of Payments.”
- Workers’ remittances are current transfers by migrants considered residents in the source.
- They are an essential source of income for low- and middle-income countries.
Global remittance: What’s predicted in 2023?
- Remittance flow growth into South Asia is expected to slow to 0.7% in 2023.
- It flows to India, in particular, are expected to fall due to inflation and a slowing economy in the United States.
- According to the report, a decline in GCC economic growth and a drop in oil prices will further reduce remittance flows to all South Asian countries.

Remittances can help to achieve the SDGs in a variety of ways:
- At the family level. Recognising the positive socioeconomic impact of remittances on the well-being of families.
- At the community level. Promoting laws and measures that advance the interrelationships between remittances and financial inclusion.
  - Encourage market competition and regulatory reform, and mitigate any negative impact of climate change.
- At the international level. By ensuring that the revitalised Global Partnership for Sustainable Development.

A downturn in the global economy can negatively impact remittance flows.
Workers employed abroad may lose their job if they are in heavily-cyclical industries:
- Such as construction, and may have to stop sending remittances.
The home country’s income may be reduced significantly, rendering it unable to fund projects or continue development.
Workers who have relocated abroad may return home, exacerbating the problem by increasing demand for services in an already overburdened economy.

Remittances are an essential component of the global economy, fueling growth at home and abroad.
For hourly workers, such as migrants, rising inflation may mean their wages do not stretch as far as needed to allow them to send money home and live abroad.

Pic Courtesy: freepik

Content Source: Indian Express