Remittances to India dip for second consecutive year: Reserve Bank

Personal transfers by Indians living overseas, including remittances by migrant workers to their families in India, have declined for the second consecutive year in 2016-17, Reserve Bank of India data show.

The transfers have fallen below the $60 billion level for the first time since 2010-11, even though, according to estimates, India remains the top recipient of remittances.

The balance of payments (BoP) statement released late last week shows personal transfers between resident and non-resident households dipped 6.8 per cent to $59.1 billion last fiscal, after falling 5.8 per cent in 2015-16 to $63.4 billion. Significantly, workers’ remittances that make up a substantial portion (over 60 per cent) of household-to-household transfers rose last fiscal after a big dip in the preceding year.

A large chunk of workers’ remittances comes from Indian migrants working in the oil-rich Arab nations. The sharp fall in oil prices in 2015, political turmoil in some of the nations in the region, and interventions by the governments of many West Asian nations to protect their economies affected remittances from the region.

As the result, total workers’ remittances declined 14.6 per cent in 2015-16 to $37.7 billion.

However, a part recovery in oil prices and improved political condition in the region as well as turnaround in other parts of the global economy enabled a 3.7 per cent recovery in the amount transmitted by overseas workers to their families in India to $39 billion in 2016-17.

Household transfers and remittances are an important source of funds to finance the country’s imports and are mostly seen as a more stable source of foreign exchange than foreign direct investment and foreign portfolio inflows.

It is also described as a third pillar of development — overseas development assistance and FDI being the other two. Household-to-household transfers had peaked in 2014-15 to $67.3 billion. That year, workers’ remittances climbed to $44.1 billion and accounted for 65 per cent of the transfers between households.

A World Bank report on ‘Migration and Remittances’ in April said that economic slowdown in Saudi Arabia and Kuwait had adversely impacted Indian migrant workers in those nations.

It further suggested that slow growth and fiscal consolidation in Gulf Cooperation Council nations could keep remittances’ growth in nations such as India muted. For the current calendar year, the report has forecast remittances to India may rise about 1.9 per cent.

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