Our Bureau

New Delhi, Dec 8

INDIA was the largest recipient of remittances in the world at $21.7 billion in 2004, followed by China and Mexico at $21.3 billion and $18.1 billion respectively, according to the World Bank's annual Global Economic Prospects (GEP) report for 2006.

Of the other South Asian countries, Pakistan received $3.9 billion and Bangladesh $3.4 billion in 2004.

Remittance inflows into India had surged to $20 billion in 2003 from a level of $13 billion in 2001 - mainly on the back of sharp increase in the number of migrants and good response from the non-resident Indians community to several attractive deposit schemes and bonds offered by the Central Government.

The GEP estimates that the South Asia region will receive about $32 billion in remittances in 2005, a 67 per cent increase over the levels in 2001.

Officially recorded remittances worldwide are estimated to exceed $232 billion in 2005. Of this, developing countries are expected to receive $167 billion, more than twice the level of development aid from all sources.

According to Mr Dilip Ratha, one of the co-authors of the report, remittances sent through informal channels could add at least 50 per cent to the official estimate, making remittances the largest source of external capital in many developing countries.

Asked to comment on the estimated remittance inflows for India in 2005, Mr Ratha told Business Line that it was unlikely to increase over the 2004 level. "We expect it to plateau," he said.

He however said that certain practices (like exclusionary arrangements) adopted by Indian authorities kept the remittance costs on the higher side. The GEP has said that reducing remittance costs would do more to encourage the use of formal remittance channels than will regulation of so-called informal services.

The report has recommended increasing access by poor migrants and their families to formal financial services for sending and receiving remittances. This could be done by encouraging the expansion of banking networks, allowing domestic banks in origin countries to operate overseas, providing recognised identification cards to migrants, and facilitating the participation of micro-finance institutions and credit unions in the remittance market.

Mr Ratha said that fees charged by remittance service providers are often as high as 10-15 per cent for small transfers typically made by poor migrants.

(This article was published in the Business Line print edition dated December 9, 2005)
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