Remittances from advanced nations
beat flows from Gulf region in FY21
Maharashtra
displaces Kerala
as the top
recipient State
OUR BUREAU
Mumbai, July 17
In what is seen as a shift of work-
ers to the West, Advanced Eco-
nomies (AEs) — particularly the
US, the UK and Singapore —
emerged as key source coun-
tries for remittances pipping
the Gulf Cooperation Council
region (GCC).
The share of the GCC region
in India’s inward remittances is
estimated to have declined
from more than 50 per cent in
2016- 17 to about 30 per cent in
2020-21, according to the Re-
serve Bank of India’s fifth round
of Survey on Remittances. In
contrast, AEs accounted for a 36
per cent share in 2020-21, as per
the findings of the Survey (for
2020-21 reference period) pub-
lished in the RBI’s latest
monthly bulletin. The US sur-
passed the UAE as the top source
country, accounting for 23 per
cent of total remittances in
2020-21.
This corroborates with the
World Bank report (2021) citing
the economic recovery in the US
as one of the important drivers
of remittances into India, ac-
counting for almost 20 per cent
of total inflows, said RBI officials
Soumasree Tewari and Ranjeeta
Mishra in an article ‘Headwinds
of Covid-19 and India’s inward
remittances’.
The officials noted that the
The US surpassed the UAE as the top source country, accounting for
23 per cent of total remittances in 2020-21
share of the traditional recipi-
ent States of Kerala, Tamil Nadu
and Karnataka, which had a
strong presence in the GCC re-
gion, almost halved in 2020-21,
accounting for only 25 per cent
of the total remittances since
2016-17. Maharashtra emerged
the top recipient State (with
about 35 per cent of the total
share) surpassing Kerala (about
10 per cent).
The RBI officials assessed that
apart from the host country dy-
namics, reducing wage differ-
entials, changing occupational
patterns in these States with in-
creasing white-collar migrant
workers to the GCC region and
entry of low-wage semi-skilled
workers from other States and
Asian countries may have led to
this compositional shift.
By contrast, migration from
Uttar Pradesh, Bihar, Orissa, and
West Bengal to the Gulf coun-
tries has increased in recent
years. According to the Ministry
of External Affairs data, more
than 50 per cent of the ap-
proved emigration clearances
for the GCC region in 2020 was
for these States. With the dom-
inance of low-wage unskilled la-
bourers, however, their share in
remittance has remained signi-
ficantly low; while the share of
Maharashtra and Delhi has in-
creased significantly in 2020-21
to about 35 per cent (from about
17 per cent in 2016-17) and about
8 per cent (from about 6 per
cent), respectively, according to
the article.
This was despite Maha-
rashtra’s remittances dipping
almost 13 per cent in 2020-21
with the largest number of
Covid-19 cases and prolonged
lockdown.
NRI deposits
While NRI deposits are empiric-
ally found to be driven by the ex-
change rate and interest differ-
entials, the trend in NRE
(Non-Resident External) ac-
count, which is typically used
for parking income from
abroad by non-resident Indians
in rupee (INR), saw a sharp spike
in the consecutive waves of the
pandemic, according to the art-
icle. For example, NRI deposits
rose by $7.826 billion in April-
December 2020 against $5.862
billion in the year-ago period.
Apart from favourable yields,
deposits in the NRE accounts in-
creased significantly during
this period as returning over-
seas migrants, amidst lay-offs
and heightened uncertainty re-
garding their return and future
employment prospects, repatri-
ated their savings into these
accounts.
While overseas remittances
for family maintenance, repres-
enting a chunk of India’s in-
bound remittances, moderated
with the loss of overseas em-
ployment opportunities, local
withdrawals from non-resident
rupee-denominated deposit ac-
counts increased implying the
drawdown of savings to tide
over the crisis, the authors said.
India remained the top recip-
ient country (with $89.4 billion
inward remittances), account-
ing for 12 per cent of total global
remittances, recording a mar-
ginal decline of 0.2 per cent in
2020 and a growth of 8 per cent
in 2021.
Bank group-wise share
The impact of the slowdown in
remittances has been quite di-
verse across banks. In 2020-21,
the share of private banks in
overall remittances stood at
52.8 per cent followed by public
sector banks and foreign banks
at 39.4 per cent and 7.8 per cent,
respectively.