ET Explains: What drives inward remittances?
remittances peaked till the election year and then slowed down.
India has been on top of the charts of remittances from its diaspora. In 2022-23 it crossed the $100billion mark to $112 billion and a record $29 billion in the December quarter alone. But will the uptrend continue? An explainer on what drives inward remittances.
What are inward remittances? They are money sent by an Indian who is residing overseas to their families back home for their daily maintenance. In India, in terms of data, it is reflected in “ private transfers” in the balance of payments and is a major source of foreign currency resources for any economy.
What are the factors that drive remittances? It largely depends on a country’s overseas migration and the job opportunities that arise in different overseas markets that a country’s resident chooses to make use of besides the compensation package they offered. For Indians, opportunities first started pouring in a big way during the seventies when the oil boom in the Persian gulf countries created opportunities for Indian semiskilled workers. This led to some initial pick up in remittances. Later in the nineties the IT boom created a huge market for Indian skilled IT professionals in advanced economies in North America and Europe. This led to a surge in remittances to India leading India to emerge as one of the top recipients of remittances.
How does a country benefit from remittances in an open economy where foreign currency flows from a variety of sources?
Since the liberalisation of the
