Remittances to India Crossed $100 Billion Mark in 2022 [UPSC Current Affairs]

India has set a new record by receiving over $100 billion in annual remittances. India has become the first country in the world to achieve this landmark. In this article, you can learn more about this development and the reasons for this surge in remittances. This topic is relevant for the IAS exam Indian economy segment.

Remittances to India

The money transferred from Non-Resident Indians (NRIs) to their friends and families in India exceeded $100 billion (in 2022), with a growth rate of 12% compared to the previous year, according to the World Bank.

• India is expected to retain its position as the top destination for remittances in FY23. It had reached the first position in FY21 after surpassing China. 
• The recent data suggests that there has been consistent and rapid growth in “personal transfers” to India, which had slowed down during FY21 due to the pandemic but has now resumed and strengthened.

Remittances rise at a time when FDI inflows seem to have slowed

• During a period when foreign direct investment (FDI) is slowing down, there has been a surge in remittances. 
• According to a multilateral development financing institution, remittances to low- and middle-income countries increased by 5% in 2022, totalling $630 billion. 
• These figures indicate that remittances to low- and middle-income countries were equal to FDI inflows during the same period.

Reasons for the Surge in Remittances to India

• TerraPay, a mobile payments provider based in London, reported that remittances from Qatar, Saudi Arabia, Australia, and the US to India have increased.
• India has the largest diaspora in the world, with around 18 million Indians living outside their country of birth.
• According to Bloomberg, the resumption of travel and vaccinations in the Gulf region has allowed migrants to return to work, resulting in increased remittances to India.
• Highly-skilled Indian migrants from the US, the UK, and Australia have also been sending more money home, supported by job support programs during Covid-19 restrictions.
• The depreciation of the rupee against the US dollar may have also encouraged Indian migrants to send more money back home.

Private remittances a major boost to India’s current account:

• India receives a lot of money from private remittances sent by people living abroad, which is helpful for the country’s current account. 
• India’s trade of goods often results in a deficit, but services exports have helped maintain a good balance of payments recently. 
• In Q3FY23, India’s current account deficit narrowed to $18.2 billion or 2.2% of GDP, thanks to a reduction in the deficit in goods trade. 
• Analysts predict that the CAD in FY23 will be around $77-80 billion, which is a relatively low level, due to a decrease in the trade deficit in Q4FY24.

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