The recent data from the RBI’s March Bulletin highlights significant changes in the sources of inward remittances to India, as revealed in the report titled “Changing Dynamics of India’s Remittances – Insights from the Sixth Round of India’s Remittances Survey.”
Key Findings:
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Developed Economies as Leading Sources:
- U.S. and U.K. have emerged as the dominant sources of remittances to India.
- Combined, these two countries accounted for 40% of total inward remittances in FY24, a significant increase from 26% in FY17.
- U.K.’s Share:
- Increased sharply from just 3% in FY17 to 10.8% in FY24.
- U.S.’s Share:
- Became the top contributor in FY21 with 23.4%.
- Further increased to nearly 28% in FY24.
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Reasons for the Shift:
- The rising share of the Indian labor force in developed countries, particularly in high-income jobs.
- Skilled professionals like IT workers, engineers, and healthcare workers are prominent contributors, as these sectors are well-represented in countries like the U.S. and U.K.
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Declining Share from Gulf Countries:
- UAE’s Share: Dropped from 27% in FY17 to 19.2% in FY24.
- Saudi Arabia’s Share: Nearly halved, decreasing from around 13% in FY17 to 6.7% in FY24.
- This decline is attributed to:
- Stagnant wages and lower remittance growth in Gulf countries.
- A slowdown in construction and labor-intensive industries, traditionally employing large numbers of Indian workers.
- Changing migration patterns, with fewer Indian workers opting for jobs in Gulf countries compared to developed economies.
Implications:
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Increased Dependence on Developed Economies:
- India is becoming increasingly reliant on remittances from countries like the U.S. and U.K., indicating a shift in migration trends.
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Skilled Migration Dominates:
- The shift suggests a transition from low-skilled labor migration (common in Gulf countries) to high-skilled migration to developed nations.
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Economic Impact:
- Higher remittances from developed nations reflect better earning potential for Indian workers abroad, contributing more to household incomes and India’s foreign reserves.
This shift in remittance sources demonstrates the changing global migration dynamics and the growing prominence of Indian professionals in developed economies. However, it also raises questions about ensuring consistent remittance inflows, given the decline from traditional sources like the Gulf countries.
