By Lee Kah WhyeSingapore, December 5 (ANI): A World Bank report published last week revealed that remittance flows to India from its migrant workers are on track to gain 12 per cent to reach a record USD100 billion for the year. Remittance growth in 2021 from a year earlier was 7.5 per cent.
That puts its inflows far ahead of Mexico (USD60 billion), China (USD51 billion), the Philippines (USD38 billion), Egypt (USD32 billion) and Pakistan (USD29 billion), positioning the country to retain its spot as the world's top recipient of remittances. Such foreign remittances make up almost 3 per cent of India's GDP.
At a regional level, remittances to South Asia grew an estimated 3.5 per cent to USD163 billion in 2022. However, there is large disparity across countries. While remittances to India is projected to increase 12 per cent, Nepal's will only grow 4 per cent and the remaining countries (Including Sri Lanka, Pakistan and Bangladesh) is expected to see an aggregate decline of about 10 per cent.
The easing of flows reflects the discontinuation of special incentives some governments had introduced to attract flows during the pandemic, as well as preferences for informal channels offering better exchange rates. 2022 also marks the year several short-term and longer-term trends that were obscured by the pandemic were catalytic in stimulating remittance flows to India.
Firstly, it was observed that there was a gradual 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-income countries like the United States, United Kingdom and Asia-Pacific countries such as Singapore, Japan, Australia and New Zealand. Between 2016-17 and 2020-21, the share of remittances from the United States, United Kingdom, and Singapore increased from 26 per cent to over 36 per cent, while the share from the 5 GCC countries (Saudi Arabia, United Arab Emirates, Kuwait, Oman, and Qatar) fell from 54 to 28 per cent.
With a share of 23 per cent of total remittances, the United States surpassed the United Arab Emirates as the top source country in 2020-21. About 20 per cent of India's emigrants are in the United States and the United Kingdom. According to the US Census, of the approximately 5 million Indians in the United States in 2019, and the Indian diaspora in the United States is highly skilled with 43 per cent of Indian-born residents of the United States had a graduate degree, compared to only 13 per cent of US-born residents.
The structural shift in qualifications and destinations has accelerated growth in remittances tied to high-salaried jobs, especially in services. During the pandemic, Indian migrants in high-income countries worked from home and benefitted from large fiscal stimulus packages. Post-pandemic, wage hikes and record-high employment conditions supported remittance growth in the face of high inflation.
Secondly, the economic conditions in the GCC (30 per cent share of India's remittances) also played out in India's favour. The majority of the GCC's Indian migrants are blue-collar workers who returned home during the pandemic. Vaccinations and the resumption of travel helped more migrants to resume work in 2022 than in 2021. GCC's price support policies kept inflation low in 2022, and higher oil prices increased demand for labour, enabling Indian migrants to increase remittances and counter the impact of India's record-high inflation on the real incomes of their families.
Thirdly, Indian migrants may have taken advantage of the depreciation of the Indian rupee against the US dollar (10 per cent between January and September 2022) and increased remittance flows.
On a global level, the rise of global remittance flows is predicted to be 4.9 per cent in 2022. Remittance flows to developing regions were shaped by several factors in 2022. Besides the determination of migrants to help their families back home, a gradual reopening of various sectors in host countries' economies expanded many migrants' income and employment situation. On the other hand, rising prices adversely affected migrants' real incomes and remittances.
Growth in remittances is expected to moderate to 2 per cent in 2023, as GDP growth in high-income countries continues to slow. Downside risks remain substantial, including a further deterioration of the war in Ukraine, volatile oil prices and currency exchange rates, and a deeper-than-expected downturn in major high-income countries. For South Asia, remittance flow is predicted to slow to 0.7 per cent.
Remittance costs remained high during the second quarter of 2022, at twice the Sustainable Development Goal (SDG) target of 3 per cent. According to the World Bank's Remittance Prices Worldwide Database, the global average cost of sending USD200 was 6 per cent in the second quarter of 2022, not very different from a year previous. Among developing country regions, the cost was lowest in South Asia, at about 4.1 per cent, while Sub-Saharan Africa continued to have the highest average cost, about 7.8 per cent.
Migrant workers play an important role in the economy of their host country and this is something the World Bank feel is important and that host countries should have policies to help them.
"Migrants help to ease tight labour markets in host countries while supporting their families through remittances. Inclusive social protection policies have helped workers weather the income and employment uncertainties created by the COVID-19 pandemic. Such policies have global impacts through remittances and must be continued," said Michal Rutkowski, World Bank Global Director for Social Protection and Jobs. (ANI)