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The good news is that remittances into India have recovered in 2017 after declining in 2016. India is estimated to have received $68.9 billion last year, rebounding from $62.7 billion in 2016, but it is a still below the 2014 peak of $70.4 billion. The recovery has a lot to do with the firming up of oil prices and growth in the six Gulf Cooperation Council countries. These six monarchies together were the source for about 56 per cent of the remittances received by India in 2017. Higher growth in the EU and the US also contributed to the rebound in remittances, which had fallen after the West Asian economies slowed with a sharp fall in oil prices.
The GCC countries will remain the primary source of remittances if they continue to attract millions of migrant workers from India. The UAE has been the largest source of remittances for India and that’s not surprising as it also hosts the largest pool of Indian migrant workers. However, introduction of various taxes and changes in employment laws in the GCC countries could affect remittances from those nations. Taxes will lower net earnings of Indian workers and thereby hit the amounts that will be remitted home by them and changes in employment laws will reduce the number of jobs that may be available to Indians.
Remittances are critical for India. In many difficult years, when India’s import bill zoomed hurt by high prices of petroleum crude and huge imports of gold, these remittances helped avoid a balance of payment crisis. It has also been useful in years the country experienced sharp volatility in portfolio investments — it also helped in maintaining a strong foreign exchange balance and in better management of exchange rates. Equally important is its impact on domestic demand and growth. The economies of Punjab and Kerala have particularly benefited from money remitted by overseas workers. According to World Bank, upsurge in remittance flow may continue this calendar year helped by stronger growth in the developed nations and increase in oil prices. Now, that’s one reason to welcome the spike in oil prices.
Senior Deputy Editor
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