REMITTANCES TO INDIA
1. Context
India is expected to receive a record $100 billion in remittances in 2022, the top recipient this year. India is expected to receive a record $100 billion in remittance in 2022, the top recipient this year, the World Bank has said. In its Migration and Development Brief, the World Bank has said India's remittance will grow 12 per cent from 7.5 per cent last year, resulting in a $100 billion flow as compared to $89.4 billion in 2021. It attributed the feat to the large share of Indian migrants earning relatively high salaries in the United States, United Kingdom, and East Asia.
2. What is Remittance?
The World Bank defines it as "the sum of worker's remittances, compensation of employees, and migrants' transfers as recorded in the IMF Balance of payments. Worker 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.
3. Types of Remittances
The RBI has segregated remittances into two main types:
3.1 Inward Remittances
- Inward remittances are funds transferred from abroad to India.
- These transfers are typical of a personal nature and are sent to support a family.
- For example, if you are an NRI in the United States and send money to your parents in India, this is considered an inward remittance.
- In most cases, remittances are sent through a bank, money transfer agents, or more recently, online money transfer specialists.
- Sending money to India is simple, quick, and painless if you do it online through a reputable money transfer service provider.
3.2 Outward Remittances
- Outward remittances are funds transferred from India to countries outside of India.
- Sending money from India to your Children Studying in the United States is an example of outward remittances.
- Indian individuals can transfer up to USD 2,50,000 per fiscal year under the Liberalised Remittance Scheme (LRS).
- The industry of outward remittances is not as competitive as the industry of inward remittances.
- However, there are now a few online money transfer companies that offer money transfer services from India to the United States at a faster and cheaper rate than traditional methods of sending money.
4. Why are Remittances in India so high this year?
- According to World Bank, there’s been a “gradual shift in destinations” for Indian migrants aided by a “structural shift in qualifications” that 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,” the World Bank says. Migrants moved “from largely low-skipped, informally employment in the Gulf Cooperation Council (GCC) countries to the 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).” - During the Covid-19 pandemic, Indian migrants in high-income countries benefited from work-from-home and large fiscal stimulus packages, the report said. As the pandemic eased, the wage hikes and “record-high employment conditions” helped migrants send money home despite high global inflation, the report added.
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 to Indian labourers.” - Depreciation of the Indian rupee to the US dollar - it fell 10 per cent between January and September 2022 - may have also proven to be advantageous for Indian migrants and increased remittance flow, according to the brief.
In 2022, vaccinations and the resumption of travel helped migrants resume work, increasing remittance to the country.
5. Global Remittances: What's predicted in 2023?
The growth of remittance flows into South Asia in 2023 is expected to slow to 0.7 per cent. This year will stand as a test of the resilience of remittances from white-collar South Asian migrants in high-income countries.
For Mains:1. What are remittances explain their types and discuss why remittances are increasing for India. (250 Words) |
Source: The Indian Express
