India is poised to be the world’s leading supplier of labour, which will propel remittances to around $160 billion in 2029 from $115 billion in 2023, according to RBI’s latest Report on Currency and Finance (RCF).
India is already the country with the highest remittance recipients in the world, accounting for 13.5 per cent of the world total, with its share increasing over time.
The ratio of remittances to GDP for India has gradually increased from 2.8 per cent in 2000 to 3.2 per cent in 2023 and is now above that of gross FDI inflows to GDP ratio (1.9 per cent in 2023), providing strength to India’s external sector, the authors of the report (whose theme is “India’s Digital Revolution”) said.
“Going forward, India is poised to be the world’s leading supplier of labour as its working-age population is expected to rise until 2048, while it has started dwindling for major AEs (advanced economies).
Demand for Indian migrant workers
“Thus, the global demand for Indian migrant workers will remain high, which along with continuing skill upgradation of the workforce would provide a sustained boost to inward remittances,” per the report put together by a team from the Department of Economic and Policy Research (DEPR), with inputs from several operational departments.
Referring to World Bank data, the report said global remittances that are increasingly being effected through mobile money and digital platforms are estimated to have increased to US$ 857.3 billion in 2023, led by India (US$ 115.3 billion), Mexico (US$ 66.2 billion), China (US$ 49.5 billion) and the Philippines (US$ 39.1 billion).
Migrant stock from India comprised 1.3 per cent of its population in 2020. In 2021, more than half of India’s inward remittances were from the Gulf countries, while North America accounted for 22 per cent share.
The cost of sending remittances globally has decreased over time, with digitalisation playing a key role, per RCF.
The average cost of receiving remittances in the case of India stood at 5.01 per cent in Q1 (January-March) 2024, marginally lower than 5.04 per cent in Q4 (October-December) 2023), but higher than the Sustainable Development Goal (SDG) of 3 per cent per US$ 200 remittance.
The global average cost of sending US$ 200 as remittance stood at 6.35 per cent in Q1:2024, marginally lower than 6.39 per cent in Q4:2023 (World Bank, 2024). Nonetheless, it is more than double the SDG target.
For India, in Q4 2023, the cost of remittance from Singapore, Malaysia, the UK, Kuwait, Italy and Bahrain was within the SDG target, while the cost from Thailand and South Africa was more than 10 per cent.
“This may be due to the dominance of banks in the latter set of countries, while the former countries have a competitive remittance industry with banks facing competition from money transfer operators (MTOs) and FinTechs,” the report said.
Additional factors that influence remittance cost include the speed of money transfer, the payment instrument used for transfer (cash or bank account), and the access point/mode of transfer (bank branch, internet or agent).
The authors opined that the digitalisation of cross-border remittance flows would improve the speed and transparency of transactions while reducing liquidity costs and fees.