In 2020, Indian migrants were sending home record sums of money. We received around $80 billion! Bang in the middle of the pandemic and the money still kept coming in. (View Highlight)
Because India’s remittances are slated to hit a record $100 billion this year! The great Indian diaspora with over 18 million Indians spread across the world will be sending home record sums of money. (View Highlight)
Let’s start with Gulf money. It accounts for 30% of all remittances and we’re seeing an uptick here. Granted many migrants lost their job in 2020, but the Middle Eastern economies opened up fairly quickly. Oil prices recovered. There was increasing demand for labour. And inflation in the Gulf region remained consistently lower than in most parts of the world. So people had more money to expend and they sent some of it back home. (View Highlight)
There’s also the fact that the Indian currency has depreciated quite a bit against the dollar. And since most middle eastern currencies are pegged to the dollar, you get more bang for the buck when you send money back home. For instance, people received ₹70,000 if they were sending 1,000backhome.Now,thesame1,000 can fetch ₹80,000. So whenever the rupee falls, you typically see migrants rushing to save up every penny and send it home. Some of them even borrow money at low-interest rates to really make the most of the situation. (View Highlight)
Note: Q: How does the depreciation of the Indian currency affect migrant workers sending money back to India?
A: The depreciation of the Indian currency against the dollar means that migrant workers are able to get more bang for their buck when sending money back to India, as most Middle Eastern currencies are pegged to the dollar. This has led to migrants rushing to save up money and even borrowing money at low-interest rates to take advantage of the situation.
But there’s another reason why we’re seeing a boom in remittance figures. You see, migration patterns have changed — especially for skilled Indians. People are heading to places like the US and Canada in droves. And out of 5 million Indians in the US, 57% of them have been living there for over 10 years. That means they’re also reaching their ‘peak’ earning potential now. They’re high earners in the services domain. Like the ‘tech’ crowd who saw a boom in their incomes in 2021 and 2022 (up until a few months ago). People saved up and sent some of that extra cash back home. And since they earn considerably more than the migrants in the Gulf, their contribution to remittances can be significant. In fact, the share of remittances from the US, UK, and Singapore has jumped from 26% to 36% since 2017. Remittances from the US occupy the top spot now and have overtaken the UAE. (View Highlight)
We said that in 2020 we were worried about how remittances from the Gulf could tumble if people didn’t go back. Well, we actually got that part right!
You see, the Gulf is where many blue-collar workers migrate to. Maybe because of the proximity. Maybe something else. But, it’s this region that finances a considerable part of Kerala’s spending. In 2014, 36% of Kerala’s net state domestic product (which is basically the growth of the state) was due to remittances. But by 2018, that had fallen to just 19%. (View Highlight)
Note: Remittances from the Gulf are a major source of spending for Kerala, India, accounting for 36% of the state’s net domestic product in 2014. However, this number had fallen to 19% by 2018, likely due to fewer people migrating to the Gulf for work.
Well, back in 2016–17, Kerala received 19% of remittances that came into the country. But by 2021, it fell to 10%. And Kerala is a state that still depends on remittances. So it’s no wonder then that earlier this year, the RBI noted that Kerala was “highly stressed.” It’s among the top 10 states with the highest debt burden. (View Highlight)
