India leads with record $125b inward remittance

India stays top as the largest recipient of global remittances, with a 12.3 per cent surge in inward flow to $125 billion in 2023, underscoring the crucial role played by the Indian diaspora in supporting families and contributing to the country's economic resilience.

The US continued to be the largest source country for remittances while the GCC countries including the UAE and Saudi Arabia, where millions of migrant workers live, remained top sources of remittances in 2023.

The World Bank’s latest Migration and Development Brief reveals a continuing growth in remittance flows to low- and middle-income countries (LMICs) in 2023, albeit at a slower pace of 3.8 per cent, reaching a total of $669 billion compared to previous years.

“Resilient labour markets in advanced economies and the GCC countries played a pivotal role in supporting migrants' ability to send money home,” said the report.

Led by India, South Asia sustained its position as the top recipient region while the Middle East and North Africa saw a decline in remittance flows for the second consecutive year, mainly driven by a sharp drop in flows to Egypt, according to the report.

This year, the top five remittance recipient countries include Mexico (67 billion), China (50 billion), the Philippines ($40 billion), and Egypt ($24 billion), said the report, raising awareness about the potential impact of global economic conditions on remittance flows.

In 2022, the top five recipient countries for remittances in 2022 were India (receiving $111 billion), Mexico ($61 billion), China ($51 billion), the Philippines ($38 billion), and Pakistan ($30 billion).

Data from India’s Ministry of Finance showed that in fiscal year 2021-22, the US was the biggest source of remittances to India, with a 23.4 per cent share in total remittance flows, followed by the UAE at 18 per cent. The UK was in third place with a 6.8 per cent share and Saudi Arabia, the Arab world’s largest economy, was the sixth biggest source of remittances to India with a total share of 5.1 per cent in total remittances, while Kuwait, Oman and Qatar had a share of 2.4 per cent, 1.6 per cent and 1.5 per cent, respectively.

The latest World Bank report said remittance flows to India experienced notable growth, contributing to the overall positive trend. “South Asia, as a whole, witnessed a 7.2 per cent increase in remittances in 2023.The Indian economy, buoyed by a tight labour market in the US and robust employment growth in Europe, outperformed previous forecasts by reaching $125 billion in remittances for the year.”

The report suggests that remittances have surpassed the sum of foreign direct investment and official development assistance in recent years, presenting opportunities for private capital mobilisation.

India's prominence in the global remittance landscape is a testament to the significant role played by the Indian diaspora in supporting the country's economy, the report said, emphasising the need for inclusive labour markets and social protection policies to sustain remittance flows, which serve as vital lifelines for developing countries like India.

By region, remittance inflows grew for Latin America and the Caribbean (8.0 per cent), South Asia (7.2 per cent), East Asia and the Pacific (3.0 per cent), and Sub-Saharan Africa (1.9 per cent). Flows to the Middle East and North Africa fell for the second year, declining by 5.3 per cent mainly due to a sharp drop in flows to Egypt. Remittances to Europe and Central Asia also fell by 1.4 per cent after gaining more than 18 per cent in 2022.

Based on the trajectory of weaker global economic activity, growth of remittances to LMICs is expected to soften further to 3.1 per cent in 2024. Driving the moderated forecast are a slowing economic growth and the prospect of weaker job markets in several high-income countries. Additional downside risks include volatile oil prices and currency exchange rates, and a deeper-than-expected economic downturn in high-income countries.

“During crises, migrants have weathered risks and shown resilience to support families back home. But high inflation and subdued global growth is affecting how much money they can send,” said Iffath Sharif, global director of the Social Protection and Jobs Global Practice at the World Bank. “Labour markets and social protection policies in host countries should be inclusive of migrants, whose remittances serve as a vital lifeline for developing countries.”

The World Bank's Remittances Prices Worldwide Database reveals that remittance costs remain persistently high, averaging 6.2 per cent to send $200 as of the second quarter of 2023. The report highlights that banks continue to be the costliest channel for sending remittances, with an average cost of 12.1 per cent.

• Business