Report by Reserve Bank of India (RBI), titled “Changing Dynamics of India’s Remittances – Insights from the Sixth Round of India’s Remittances Survey”, highlights a significant shift in India’s remittance landscape. Developed economies, including United States and United Kingdom, have overtaken Gulf nations as largest sources of remittances to India. This trend indicates evolving migration patterns and rising contribution of skilled Indian workers in high-paying sectors abroad.
RBI’s Sixth Round of Remittances Survey Findings
Surge in Total Remittances: India’s remittances more than doubled, increasing from $55.6 billion in 2010-11 to $118.7 billion in 2023-24.
Future Projection: The central bank estimates remittances will remain high, possibly reaching $160 billion by 2029.
Dominance of Developed Economies:
US and UK Contribution: Together, remittances from US and UK nearly doubled to 40% of total inflows in FY24, compared to 26% in FY17.
- United States: Share increased from 23.4% in FY21 to nearly 28% in FY24.
- United Kingdom: Share rose sharply from 3% in FY17 to 10.8% in FY24.
Other Developed Nations:
- Singapore: Share increased to 6.6% in FY24, the highest since FY17 (5.5%).
- Australia: New entrant with 2.3% share in FY24.
Declining Share from Gulf Nations:
UAE: Contribution fell to 19.2% in FY24, down from 27% in FY17.
Saudi Arabia: Share nearly halved to 6.7% in FY24 from 11.6% in FY17.
Overall GCC Contribution: Remittances from Gulf Cooperation Council (GCC) countries dropped from 47% in FY17 to 38% in FY24, reflecting declining job opportunities in the Gulf.
Top Recipient States of Remittances
- Maharashtra: Received the highest share at 20.5% in FY24, though this was a decline from 35.2% in FY21.
- Kerala: Share increased significantly to 19.7% from about 10% during the same period.
- Tamil Nadu: Ranked third with 10.4%, followed by Telangana (8.1%) and Karnataka (7.7%).
- Northern States’ Share: States like Haryana, Gujarat, and Punjab saw rising shares, though each accounted for less than 5% of total remittances.
Preferred Channels for Remittances
- Rupee Drawing Arrangement (RDA) remains the dominant mode of inward remittances, followed by direct Vostro transfers and fintech platforms.
- Digital Remittances: Growing rapidly, accounting for 73.5% of total remittance transactions in FY24.
Reasons for Rise in Remittances from Developed Economies
Shift Toward Skilled Migration:
- Higher Paying Jobs in Developed Nations: Indians have increasingly migrated to countries like the US, UK, Canada, and Australia for white-collar jobs in finance, technology, and healthcare.
- UK-India Migration and Mobility Partnership: Made the UK work visa process easier, leading to a surge in Indian migrants, from 76,000 in 2020 to 250,000 in 2023.
- Canada and Australia’s Skilled Immigration Systems: Policies like Canada’s Express Entry and Australia’s point-based system favor skilled Indian professionals, boosting remittances.
Declining Job Opportunities in Gulf:
- Economic Diversification and Automation: Reduced demand for low-skilled Indian workers in the Gulf’s construction sector.
- Nationalization Policies: Programs like Nitaqat (Saudi Arabia) and Emiratization (UAE) prioritize local workers over migrants.
- Post-Covid Migration Shifts: Many Indian migrants who returned from the Gulf during the Covid-19 pandemic later moved to advanced economies for better job prospects.
Changing Migration Patterns by Region:
- Southern States (Kerala, Tamil Nadu, Andhra Pradesh, and Telangana): Skilled workers from these states increasingly prefer destinations like the US, UK, Canada, and Australia over the Gulf.
- Northern States (Uttar Pradesh, Bihar, and Rajasthan): Continue sending large numbers of workers to the Gulf due to lower educational attainment and limited eligibility for skilled jobs in advanced economies.
Education-Driven Migration:
- Rising numbers of Indian students pursuing higher education abroad, especially in Canada (32% of Indian students), the US (25.3%), the UK (13.9%), and Australia (9.2%), contribute to enhanced remittances.
Transaction Size and Cost of Remittances:
- High-Value Transactions: Remittances above $6,000 (₹5 lakh) accounted for 29% of total transactions in FY24.
- Lower Cost of Remittances to India: The global average cost of sending $200 was 6.65% (Q2 2024), while India’s average cost was 4.9% in 2023, meeting the G20 target of keeping costs below 5%.
Remittances Outpacing FDI:
India’s remittance inflows have consistently outpaced its gross inward Foreign Direct Investment (FDI) since the early 2000s, reinforcing remittances as a stable and crucial source of foreign earnings.
Impact of Changing Remittance Dynamics on India
- Boost to Domestic Economy: Remittances play a crucial role in boosting household consumption, improving living standards, and enhancing rural development.
- Growth in Financial Inclusion: Increasing digital remittances and financial penetration in rural and semi-urban areas.
- Regional Imbalance: While southern states benefit more from high-value remittances from developed economies, northern states still rely heavily on low-skilled remittances from the Gulf.