Remittances

#GS-03 External Sector

Remittances:

Remittance denotes a sum of money sent by one party to another.
These days, the term typically describes the money sent by someone working abroad to their family back home.

In the case of India, the largest sources of remittances have been from Indians working in the Gulf Cooperation Council (GCC) countries (UAE, Bahrain, Saudi Arabia, Oman, Qatar, Kuwait), and the U.S./U.K.
A report by the World Bank predicts that growth in remittances will fall to 2% in 2023 as the GDP growth in high-income countries continues to slow, eroding migrants’ wage gains.
For South Asia as a whole, the growth in remittances is expected to fall from 3.5% in 2022 to 0.7% in 2023.
Remittances to India are set to touch a record $100 billion in 2022, according to the World Bank’s latest Migration and Development Brief titled, ‘Remittances Brave Global Headwinds’.
India received $89.4 billion in 2021 — this is the first time a country will reach the $100 billion mark.

World remittances are expected to touch $794 billion in 2022, up from $781 billion in 2021.
This represents a growth of 4.9%, compared to 10.2% in 2021, which was the highest since 2010.
Of the $794 billion, $626 billion went to low- and middle-income countries (LMICs).
The top five recipient countries this year are expected to be India ($100 billion), followed by Mexico ($60 billion), China ($50 billion), the Philippines ($38 billion) and Egypt ($32 billion).

According to the World Bank, one of the main reasons is the gradual reopening of various sectors in host-country economies, following pandemic-induced closures and travel disruptions.
Another major reason was the “migrants’ determination to help their families back home” during the tough post-pandemic recovery phase.
The report notes that the 10.2% growth in remittances achieved in 2021 owed a lot to the stimulus measures enacted “to underpin faltering high-income economies”, especially in the U.S. and Europe.

India’s remittances have benefitted from a gradual structural shift in Indian migrants’ key destinations from largely low-skilled, informal employment in the Gulf Cooperation Council (GCC) countries to a dominant share of high-skilled jobs in high-income countries such as the U.S., the U.K., and East Asia (Singapore, Japan, Australia, New Zealand).
In fact, between 2016-17 and 2020-21, while the remittances from the U.S., U.K. and Singapore increased from 26% to 36%, the share from five GCC countries dropped from 54% to 28%.