A study by UN population division suggests that more than 15mn Indians live abroad, making it the largest diaspora in the world. With a diaspora of that size, it is pretty clear why India is the top receiver of remittance in the world with $69 billion sent to the country in 2017, alone. The remittances to India jumped by 9.9% in 2017 compared to 2016 and is slated to increase further in 2018.
The Non-Resident Indians have had an important role to play in the economic development of the country. Every year, thousands of Indians migrate to other countries in search of better prospects and to provide for their loved ones back home. The money sent by them is used for better education, better health care, investments, savings, etc. Provision of better facilities and access to wealth raises the standard of living of their families and thereby, positively impacts the economy of the receiving country due to inflow of money and increased purchasing power.
Remittances sent are a major source of foreign currency inflow in the country. As per the World Bank, remittance inflows are a measure of credit worthiness of a country which allows high remittance receiving country to borrow more money. In 2017, foreign remittances contributed 2.8% to India’s GDP. The money received in remittances is pumped back into the domestic economy as it is spent to meet the requirements of the recipient families.
The past few months have been tough on the rupee due to the global conditions. Rise in the global crude oil prices along with the stabilizing of the US dollar and the US federal reserve increasing interest rates, have had a significant impact on the rupee. Furthermore, the recent political turmoil in Turkey and the sharp decline of the Turkish Lira has put all emerging market currencies in a state of flux, including the rupee.
The past few weeks have seen the Indian Rupee depreciate sharply, to a record low against the US dollar, crossing the 70 mark. The weakening of currency has led to a massive surge in remittances to the country. NRIs all over the world have been taking advantage of the weak currency to avail better exchange rates to transfer money to their families back home. As per the market and global conditions, the rupee may fall further which will impact the remittances by NRIs positively.
For emerging economies, international remittances constitute a major source of income, same is the case with India. The government of India has taken many steps to encourage NRI money transfers and the competitive exchange rates and low transfer fees offered by money transfer companies like Xpress Money have played a pivotal part in India becoming the top remittance receiving country in the world.