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India Expects to Receive $100 Billion in Remittances in 2022
Dec 05, 2022
Enhance your UPSC CSE preparation with our daily dose of Current Affairs wherein we discuss topics that make news at National and International level. In today's edition, we will discuss why and how India Expects to Receive $100 Billion in Remittances in 2022. The topic's relevance to the UPSC CSE syllabus is mentioned below.
For Prelims: Current Events, Remittance, Non-residents, Gulf Cooperation Council (GCC) countries, Covid-19 pandemic, Indian migrants.
For Mains: GS Paper 2 (Indian Diaspora), GS Paper 3 (Indian Economy), About Remittance, Rise in Remittance, Reason for Rise in Remittance of India, Impact of Rise in Remittance, Performance of Other Nations.
Recently the World Bank, in its Migration and Development brief has said that India’s remittances will grow 12% from 7.5% last year, resulting in a $100 billion flow as compared to $89.4 billion in 2021, the top recipient this year.
The World Bank’s report has predicted that India is expected to receive a record $100 billion in remittances in 2022, the top recipient this year. Elucidate. (150 words, 10 marks)
Remittance is basically a transfer of money in a country from non-residents, who are employed outside the country.
Remittance is generally sent by nonresidents to their family, relatives, and friends, which become a substantial source of household income.
As per the World Bank, remittance is “the sum of worker’s remittances, compensation of employees, and migrants’ transfers as recorded in the IMF Balance of Payments. Workers' remittances are current transfers by migrants who are considered residents in the source.”
Rise in Remittance
Education: “Higher education mapped onto high-income levels with direct implications for remittance flows,” the World Bank says.
Shifts: Migrants moved “from largely low-skipped, informal employment in the Gulf Cooperation Council (GCC) countries to a dominant share of high-skilled jobs in high-income countries such as the United States, the United Kingdom, and East Asia.
Hikes: The wage hikes and “record-high employment conditions”, post-pandemic, helped migrants send money home despite high global inflation.
Indian Migrants: The large share of India’s remittance is credited to the large share of Indian migrants earning relatively high salaries in the United States, United Kingdom, and East Asia.
Shift in Destinations: There’s been a “gradual shift in destinations” for Indian migrants, as per World Bank.
Shift in Qualifications: There’s also been a “structural shift in qualifications” that helped them move into the “highest-income-earner-category”, especially in services.
During the Covid-19 pandemic, Indian migrants in high-income countries benefited from work-from-home and large fiscal stimulus packages, the report said.
Despite price support policies kept inflation at bay and the migration of workers during the pandemic raised the demand for labor with higher oil prices, which in turn increased remittances for Indian laborers.
Post Pandemic Benefits: In 2022, vaccinations and the resumption of travel helped migrants resume work, increasing remittance to the country.
Hikes: Remittances to India were enhanced by wage hikes and a strong labour market in the United States and other OECD (Organisation for Economic Co-Operation and Development] countries.
Supportive Measures: In the Gulf Cooperation Council (GCC) countries, governments ensured low inflation through direct support measures that protected migrants’ ability to remit.
Income: Remittances are a vital source of household income for low- and middle-income countries.
Gross Domestic Product (GDP): Despite reaching a historic milestone of $100 billion, India’s remittance flows are expected to account for only 3% of its GDP in 2022.
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Performance of Other Nations
The overall global remittance has faced a slowdown due to the impact of an amalgam of external global shocks (inflation, slowing demand) in destination and source countries alike, as well as domestic factors.
The remittances to low- and middle-income countries will grow by 5% to $626 billion, despite global challenges in 2022, as per the World bank’s report.
The World Bank has predicted that remittance flows to South Asia this year will grow 3.5% to reach $163 billion in 2022.
Nepal has seen a rise of 4% in remittance, which is also considered a strong rise along with India.
Further Predictions’ in World Banks’ Report
The growth of remittance flows into South Asia in 2023 is expected to slow to 0.7%.
The year (2023) will stand as a test for the resilience of remittances from white-collar South Asian migrants in high-income countries.
Remittance flows in India, specifically, are predicted to decrease due to inflation and an economic slowdown in the United States.
The decline in economic growth in the GCC coupled with a fall in oil prices will further pull remittance flows down to all South Asian countries.
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