The Hindu Business Line : Steady rise in NRI remittances

BRAIN drain may be a source of worry for India's human resource development planners, as both developed and developing countries are increasingly scooping out the cream of India's talents and manpower.

But the financial administrators have reasons to be happy with the migration of workers. The reason is migration has led to increasing workers' remittances to India. This was brought out by the RBI's report .

The report, which has been prepared by the Department of Economic Analysis and Policy (DEAP), addresses issues related to the structural change and improvement in current account, the continuing debate on the appropriateness of exchange rate policies and the building-up of reserves.

According to the report, workers' remittances are almost three per cent of India's GDP. Indeed, it has helped the country in offsetting its merchandise trade deficit in a significant measure, thereby keeping current account deficits at a modest level through the 1990s and posting modest surpluses in 2001-02 and 2002-03. Moreover, the report points out that remittances have mirrored the lowest volatility among all categories of current receipts, after merchandise exports.

Unlike the capital flows, interest rate differentials are not found to be significant in determining the workers remittances, thus underlining the stable nature of these flows.

According to the report, a significant share of the remittances to India continues to be contributed by inflows from the oil exporting countries of West Asia.

However, another important source of remittance inflows to India is the US — it is expected that cyclical fluctuations in the US GDP will impact on the remittance flows to India.

Another trend that has been noticed is as the oil boom in West Asian countries slowed down, the contribution of the region attracting unskilled/semi skilled labour had significant come down between 1997-98 and 2002-03.

However, the slowdown has not impacted the aggregate remittance inflows to India, as these have been bolstered by higher inflows from America and Europe.