U.S., U.K. replace Gulf as top source of Remittance to India

Context: Reserve Bank of India (RBI), recently, released the insights about remittances received by India in the fiscal year 2023-2024.

Relevance of the Topic:Prelims: Key Trends: Remittances to India

What are Remittances?

Remittances are transfers in the form of money or goods that migrants send back to their families and friends in their home countries.
Remittance forms a part of the transfer payment category in the current account of the Balance of Payments (BoP) records in an economy.
- BoP is the transactions in goods, services and assets between residents of a country with the rest of the world for a specified time period typically a year.
- Transfer payments are the receipts which the residents of a country get for ‘free’, without having to provide any goods or services in return. They consist of gifts, remittances and grants. They could be given by the government or by private citizens living abroad.
Significance: Remittances increase household disposable incomes, lead to poverty reduction, increase investment in human capital, crucial source of foreign currency, help stabilise the balance of payments in recipient countries.

The largest share of remittances into India in 2023-24 came from the:
- United States (27.7%)
- United Arab Emirates (19.2%)
The US, the UK, Singapore, Canada and Australia together accounted for more than 50% of remittances in 2023-24.
Gulf Cooperation Council (GCC) nations- UAE, Saudi Arabia, Kuwait, Qatar, Oman and Bahrain- held 37.9% of India’s remittances in 2023-24. This is a reduction from 46.7% share in 2016-17.
Dominant recipients of remittances: Maharashtra, followed by Kerala and Tamil Nadu.

UAE is the largest hub for Indian migrant workers engaged primarily in blue-collar jobs, which are dominated by the construction industry followed by healthcare, hospitality, and tourism.
In the US, Indian migrants are mainly employed in white-collar jobs (such as management, business, science, and arts), thus explaining the higher remittances received from the US despite the lower number of migrants.

As per the World Bank data, India’s share in world remittances has risen from around 11% in 2001 to about 14% in 2024.
In 2024, India received an estimated $129 billion worth of remittances, the highest ever for a country in any year.
Remittances to India are projected to increase to around US$ 160 billion in 2029.

UPSC PYQ 2019:

Q. In the context of India, which of the following factors is/are contributor/contributors to reducing the risk of a currency crisis?

1. The foreign currency earnings of India’s IT sector

2. Increasing the government expenditure

3. Remittances from Indians abroad

Select the correct answer using the code given below:

(a) 1 only

(b) 1 and 3 only

(d) 1, 2 and 3

Answer: (b)