Prelims: Economic development | Current events of national and international importance.
Why in news?
Recently Reserve Bank of India (RBI)’s 6th 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 6th Remittances Survey
