India’s Remittance Trends 2024

India’s Remittance Trends 2024

Why in the News?

The Reserve Bank of India’s (RBI) 6th Round of India’s Remittances Survey (2023-24) reveals that advanced economies (AEs), notably the US and the UK, have surpassed Gulf nations as the leading contributors to remittances to India.

Key Findings from the 6th Round of India’s Remittances Survey
Shift in Remittance Sources:
India’s total remittances have more than doubled, rising from USD 55.6 billion in 2010-11 to USD 118.7 billion in 2023-24.

• In 2023-24, the US contributed the largest share at 27.7%, followed by the UAE at 19.2%.

• AEs, including the UK, Singapore, Canada, and Australia, together accounted for over 50%.

• The UK’s share has increased to 10.8%, up from 3.4% in 2016-17, thanks to increased Indian emigration.

• Australia has also emerged as a significant contributor, with 2.3%.

• The total share from Gulf Cooperation Council (GCC) countries (UAE, Saudi Arabia, Kuwait, Qatar, Oman, Bahrain) has decreased to 38% in 2023-24, down from around 47% in 2016-17.

State-wise Distribution of Remittances:

• Maharashtra remains the top recipient state, accounting for 20.5%, followed by Kerala with 19.7%.

• Other major states include Tamil Nadu (10.4%), Telangana (8.1%), and Karnataka (7.7%).

• There has been a rise in remittances to Punjab and Haryana.

Modes of Remittance Transfers:
The Rupee Drawing Arrangement (RDA) continues to be the dominant method for inward remittances, followed by direct Vostro transfers and fintech platforms.

• Digital remittances have surged, representing 73.5% of total transactions in 2023-24.

Reasons Behind the Shift in Remittance Sources:
Stronger Job Markets in Advanced Economies (AEs):

• AEs like the US, UK, Canada, and Australia provide high-paying job opportunities, especially for skilled Indian migrants.

• The US job market rebounded post-Covid-19, leading to increased remittances from Indian professionals.

• The UK-India Migration and Mobility Partnership (MMP) facilitated easier work visas, resulting in a tripling of Indian migration to the UK from 76,000 in 2020 to 250,000 in 2023.

• Canada's Express Entry and Australia’s immigration systems favor skilled Indian professionals, leading to better job opportunities and higher remittances.

Declining Job Opportunities in GCC:

• Many Indian migrants who returned from the Gulf during the Covid-19 pandemic have shifted to AEs for better financial opportunities.

• Economic diversification and automation in the Gulf have reduced demand for low-skilled Indian labor, particularly in the construction sector.

• Nationalization policies like Nitaqat (Saudi Arabia) and Emiratization (UAE) have further reduced job opportunities for migrants.

Changing Migration Patterns in India:

• Southern states such as Kerala, Tamil Nadu, Andhra Pradesh, and Telangana now favor AEs over the Gulf.

• Migrants from states like Uttar Pradesh, Bihar, and Rajasthan continue to migrate to the Gulf, as they have lower educational attainment, which limits their eligibility for skilled jobs in AEs.

Rise in Education-Driven Migration & Remittances:

• The growing number of Indian students studying in AEs has also contributed to higher remittances, as many students stay back for work and send money home.

• Canada hosts 32% of Indian students abroad, followed by the US (25.3%), the UK (13.9%), and Australia (9.2%).

What are Remittances?

• Remittances refer to the funds sent by overseas workers to support their families back home, playing a crucial role in household income and the economy.

• In 2024, India received a record USD 129.1 billion in remittances, making it the largest recipient globally, accounting for 14.3% of global remittances. Mexico and China follow as the next largest recipients.

Regulatory Framework for Remittances:

• The Foreign Exchange Management Act (FEMA), 1999 governs all foreign exchange transactions in India.

• Under the Liberalized Remittance Scheme (LRS) of FEMA, Indian residents can remit up to USD 250,000 per year for personal and investment purposes. Larger amounts require RBI approval.

• LRS prohibits remittances for gambling, speculative trading, and terrorism financing.

• Remittances are recorded under the current account of the Balance of Payments (BoP) as unilateral transfers, representing foreign income inflows that do not create liabilities.

Drishti Mains Question:

• Analyze the impact of shifting migration trends on India’s remittances and domestic labor market.

UPSC Civil Services Examination, Previous Year Questions
Prelims
Q1. Which of the following constitute the Capital Account? (2013)

• Foreign Loans

• Foreign Direct Investment

• Private Remittances

• Portfolio Investment
  Select the correct answer using the codes below:
  (a) 1, 2 and 3
  (b) 1, 2 and 4
  (c) 2, 3 and 4
  (d) 1, 3 and 4
  Ans: (b)

Q2. With reference to digital payments, consider the following statements: (2018)

• BHIM app allows users to transfer money to anyone with a UPI-enabled bank account.

• While a chip-pin debit card has four factors of authentication, BHIM app has only two factors of authentication.
  Which statement(s) is/are correct?
  (a) 1 only
  (b) 2 only
  (c) Both 1 and 2
  (d) Neither 1 nor 2
  Ans: (a)

Q3. Which of the following is the most likely consequence of implementing the ‘Unified Payments Interface (UPI)’? (2017)
(a) Mobile wallets will not be necessary for online payments.
(b) Digital currency will totally replace physical currency in about two decades.
(c) FDI inflows will drastically increase.
(d) Direct transfer of subsidies to poor people will become very effective.
Ans: (a)

Mains
Q. "The Indian diaspora has a decisive role to play in the politics and economy of America and European countries." Comment with examples. (2020)

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