Remittances, or money sent home by Indian ex-pats, are an important source of revenue for low and middle-income countries. It is also a terrific way to earn foreign currency.
A brief about Indians living overseas will send home a whopping $100 billion in 2022
India will continue to be the top beneficiary of remittances from its ex-pats in 2022 as well. What is more amazing this year is that the figure has surpassed $100 billion! According to a World Bank report, this is the first time any single country has received $100 billion in a single year.
According to the research, remittances to India will increase by 12% in 2022. This year, remittances have exceeded foreign direct investment flows into the country. According to the government, FDI will exceed $80 billion by 2022.
What prompted such large remittances?
Changes in work destination and employment profile – More Indians are travelling to high-income countries such as the United States, the United Kingdom, Singapore, Japan, Australia, and New Zealand. This is a departure from the past when a greater proportion of Indians worked in the informal sector in the Gulf countries. Many more are now going to advanced countries, where they can also find the most desirable career opportunities.
Long-term trends – Many Indians have been living in countries such as the United States for more than ten years. They travelled as students, received a graduate degree, and have since returned home to work.
Strong labour market – Indian ex-pats profited from work-from-home mandates as well as massive fiscal stimulus received in the US during the epidemic. While record-high inflation offset wage increases to some extent, the US continued to experience a strong labour market. Other OECD countries also had high employment rates. These countries recovered from Covid-induced slowdowns (in 2020-2021), but the global food and energy crisis caused by the Ukraine war threatens to limit growth in the future.
Migrant workers – In 2022, ex-pat labourers who are critical resources for industries in the Gulf countries will return to work. During the pandemic, many of them returned to their native India.
According to World Bank research, the Gulf Cooperation Council’s price support programmes also kept inflation in control, allowing workers to expand their savings while rising demand for oil allowed more migrants to join the labour force.
Depreciation of the rupee – The depreciation of the rupee may have also contributed to an increase in remittances because dollars sent home by NRIs represent more rupees in the hands of Indians back home.
It remains to be seen whether 2023 will be an equally bright year for remittances since many analysts believe a global recession is on the horizon and the global economy’s route ahead will be turbulent.
