Opinion - Editorials   

Relying on remittances

A recent World Bank report has once again placed India at the top of a list of countries that receive remittances from their citizens working abroad. Indian workers sent back home as much as $22 billion last year. Such remittances — private transfers by them for family maintenance as well as local withdrawals from their non-resident accounts — have been growing over the years. According to an IMF publication, they rose from $3.27 billion in 1991 to $8.45 billion in 1996, taking India to the top slot. Since then there has been an exponential growth, with the figure for 2003 being more than $21.5 billion. Evidently a more robust world economy has made possible the employment of so many migratory workers from India, with higher savings potential than ever before. The World Bank report has it that Indian workers remitted five to six times more than their counterparts from Pakistan and Bangladesh during 2004. The IMF and World Bank data also show that, India apart, very few countries have an even record in attracting their workers' remittances. Yet for all countries the importance of such private transfers can hardly be underestimated. Out of an estimated $232 billion of global remittances this year, developing countries are expected to receive $167 billion (73.5 per cent). These can generate significant welfare gains for the migrants' families as also for their home country. Taken together with the informal money transfers — which could be at least 50 per cent of the size of those coming through banking channels — remittances could well be the largest source of external capital for many countries.

In India, next only to merchandise exports, remittances have been free from the volatility associated with many other types of inflows. At the time when the current account has turned negative after being positive for three consecutive years, private transfers from abroad and software exports have helped bridge the widening trade deficit. Remittances now account for almost 3 per cent of the GDP. There is an obvious case for stepping up efforts to spur remittances. The domestic financial infrastructure has been considerably strengthened for them to flow more easily. Banks and post offices now offer speedier and cost effective money transfers from many countries in West Asia. The introduction of market-determined exchange rates and current account convertibility have been the other reasons for the increasing remittances to India. In a much broader sense, India has become an important investment destination, attracting a variety of flows of funds from many geographical regions. It is reasonable to assume that Indian workers, who have been patronising India for long, would continue to do so.

Printer friendly page  
Send this article to Friends by E-Mail

Stories in this Section

Rebuilding trust in Parliament
Relying on remittances
India at Hong Kong: more give than take
Can DTH compete with cable?
"India has done a good job on rehabilitation"
That's no way to treat the sick
Convincing argument
Retrograde step
Meerut incident
Withdraw it
Not fair
Resurgent India
Smoking in films

Copyright © 2005, The Hindu. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu