RBI's 6th Remittances Survey

Prelims: Economic development | Current events of national and international importance.

Why in news?

Recently Reserve Bank of India (RBI)’s 6^th Round of India’s Remittances Survey, was released.

• A remittance is money that's sent from one party to another and it usually refers to an overseas transfer but it can also be domestic.
• Outward remittance – It means the transfer of money from India to another country or region.
• Inward remittance – It means the transfer of funds into India from outside India.
• In India, inward remittances are exempted from tax.
• Highest remittances – In 2023-24 the inward remittances are $118.7 billion.
• It surpassed FDI inflows and financed over half of India’s merchandise trade deficit.
• It reinforces the stabilizing role of remittances in India’s external sector.

Inward remittances bring in Forex, increases purchasing parity of households and economic growth.

• Shift in source countries – Advanced Economies (AEs) now dominate remittance sources,
  • U.S. share - 27.7% (up from 23.4% in 2020-21).
  • U.S., U.K., Canada, Australia, Singapore - Combined 51.2%.
  • GCC countries - Declined to 37.9%.
• It reflects shift from low-skilled Gulf migrants to high-skilled professionals and students in AEs.
• Rise in large-value transactions – Rs 5 lakh+ transfers formed 29% of total remittance value but just 1.4% of transactions.
• Growth of digital remittances – Digital channels used in 73.5% of remittance transactions.

Average cost of sending $200 to India is 4.9% (below global avg. 6.65%, above SDG goal of 3%).

• Uneven digital adoption – High digital use in UAE (76.1%) & Saudi Arabia (92.7%).
• Low digital use in Canada (40%), Germany (55.1%), Italy (35%).
• Regional disparities in india – Maharashtra, Kerala, Tamil Nadu form 51% of total remittances.
• Bihar, UP, Rajasthan contributes less than 6%.

Policy Recommendations

• Enhancing digital remittance infrastructure and reduce costs of sending.
• Promoting financial literacy and asset creation among remittance-receiving households.
• Designing state-specific skilling and migration support systems.
• Introducing remittance-linked investment products for long-term developmental benefits.

Reference

The Hindu| RBI's 6^th Remittances Survey