According to the World Bank’s latest Migration and Development Brief, which ranks countries in terms of incoming remittances, India once again received the greatest volume in 2017. Expats sent $69 billion to India, an annual increase of nearly 10% and a healthy reversal following the decline in 2016.
The higher inflows experienced by India reflected global trends. Remittances to low and middle- income countries rose 8.5% to $466 billion, while global remittances totalled $613 billion, a 7% increase compared to a year earlier.
According to the report, economic growth in the United States, Europe and Russia drove remittances in 2017, while higher oil prices and the strengthening of the euro and Russian rouble also boosted the figures as they’re reported in US dollars.
So why is the volume of foreign remittances to India so high?
One possible explanation is due to the sheer number of Indian expats. Over 16 million Indians live abroad, more than any other country. The Gulf region accounts for the majority of them living abroad. A significant chunk of the diaspora is also present in more developed countries in Western Europe, the United States and Canada. Regardless of what kind of work these expats do, they tend to send money home to their loved ones which is utilized mainly for household and other expenses.
Another possible explanation is cultural. Indians generally feel quite a deep affiliation to their native country and retain strong ties, irrespective of how long ago they left. This also applies to second and third generation Indians who may have never been to India but maintain their connection, for example through marriage. And while the amount of money that most migrants send home usually shrinks the longer they’re away, Indians have a reputation for maintaining a relatively high level of remittances.
The third possible reason is the number of Indian migrants in the gulf region. According to Khaleej Times, more than half of the total Indian diaspora, live in the Gulf region. The United Arab Emirates has the largest number of them, followed with Saudi Arabia, Oman and Kuwait. Most of the Indian migrants in these countries fall under the blue-collar segment. The families of these blue-collar remitters tend to be dependent on the remittances and use the money for essentials including food, medicines or pay for school expenses and better housing. Hence, this segment of remitters send money irrespective of the currency exchange rates.
Returning to the World Bank’s Migration and Development Brief, it reported that the global average cost of sending $200 abroad was 7.1% in the first quarter of 2018, more than double the United Nation’s Sustainable Development Goal target of 3%.
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