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A Paradigm Shift in India’s Remittance Landscape
Context:
India is experiencing a structural shift in its remittance landscape, with Advanced Economies (AEs) emerging as the largest source of remittances, overtaking the traditional dominance of the Gulf Cooperation Council (GCC) countries.
Declining Remittances from the Gulf
- Traditional Dominance: GCC nations, such as the UAE, Saudi Arabia, Kuwait, Qatar, Oman, and Bahrain, have historically been the main sources of remittances due to the large numbers of low-skilled Indian migrant workers.
- Key Reasons for Decline:
- COVID-19 Impact: Widespread job losses and salary cuts reduced the disposable income available for remittances.
- Nationalisation Policies: Initiatives like Saudi Nationalisation Scheme (Nitaqat) or Saudisation have reduced employment opportunities for Indian workers.
- Statistical Trends:
- UAE: Remittance share decreased from 26.9% (2016-17) to 19.2% (2023-24).
- Saudi Arabia: Declined from 11.6% to 6.7%.
- Kuwait: Fell from 6.5% to 3.9%.
- Future Outlook: A normalisation of economic conditions in the GCC could potentially increase remittance inflows from the region.
Rising Remittances from Advanced Economies (AEs)
- Emergence as Major Contributors: AEs such as the United States, United Kingdom, Singapore, Canada, and Australia now account for more than half of the total remittances in 2023-24.
- Key Drivers:
- Higher Wages: Indian migrants in these countries benefit from higher wages, including higher minimum wages, which leads to higher per capita remittances.
- Skilled Migration: There has been a significant increase in the number of highly skilled Indian professionals, especially in STEM, finance, and healthcare sectors.
- Statistical Highlights:
- United States: The largest remittance contributor, increasing from 22.9% (2016-17) to 27.7% (2023-24).
- United Kingdom: Share rose from 3% to 10.8%.
- Singapore: Increased from 5.5% to 6.6%.
- Canada: Rose from 3% to 3.8%.
- Impact of Immigration Policies: Restrictive policies in countries like the US (e.g., green card backlogs and challenges related to birthright citizenship) could drive Indian migrants to either return to India or increase remittance flows to India.
Challenges Presented by the Changing Remittance Landscape
- Economic Policy Shifts: Unpredictable migration policies and a rise in right-wing politics in AEs are contributing to increased uncertainty, which may compel Indian migrants to remit more funds home.
- Return Migration Dynamics: Stricter immigration rules could result in return migration from AEs to India, leading to remittances in the form of fixed assets and other investments rather than long-term financial commitments abroad.
- Issues Faced by Indian Students Abroad: Many Indian students face wilful deskilling, where highly educated individuals are forced to accept low-skill jobs in sectors like retail and hospitality to qualify for permanent residency.
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- This trend diminishes their long-term earning potential and restricts their ability to send higher remittances.
Policy Recommendations for Maximising Remittance Potential
- Skill Harmonisation: Align domestic training with global job market demands to ensure that Indian workers can access opportunities that match their qualifications.
- Provide support for both highly skilled and low-skilled workers to prevent underemployment or forced deskilling.
- Mobility Agreements: Establish bilateral and multilateral mobility agreements with destination countries to protect the rights of Indian workers, ensure fair wages, and facilitate long-term career growth.
- Developmental Impact: Leverage remittances for productive purposes such as investments in education, healthcare, and other critical sectors.
- Enhance the role of the diaspora in contributing to economic development through knowledge and technology transfer.
