Central Idea

• In 2023, India witnessed the highest remittance inflows globally, amounting to USD 125 billion.
• The surge was influenced by various factors, including India’s currency agreement with the UAE.

World Bank’s Analysis on Remittance Growth

• Report Findings: The World Bank’s report indicates a slowdown in remittance growth in India to 12.4% in 2023, down from 24.4% in 2022.
• Increased Share in South Asia: India’s share in South Asian remittances is expected to rise to 66% in 2023 from 63% in 2022.

Global Remittance Scenario

• Other Leading Countries: Following India, the top remittance-receiving countries are Mexico (USD 67 billion), China (USD 50 billion), the Philippines (USD 40 billion), and Egypt (USD 24 billion).
• Significance in GDP: In economies like Tajikistan, Tonga, Samoa, Lebanon, and Nicaragua, remittances form a substantial part of the GDP, highlighting their critical economic role.

Contributing Factors for India

• Key Drivers: Declining inflation and robust labor markets in high-income countries contributed to increased remittances.
• Major Sources: Significant remittance flows came from the US, the UK, and Singapore, as well as from the GCC, particularly the UAE.
• UAE’s Role: The UAE is the second-largest source of remittances to India, accounting for 18% of the total.

India-UAE Currency Agreement Impact

• February 2023 Agreement: The agreement to promote local currency use in cross-border transactions and interlink payment systems has boosted remittances.
• Dirhams and Rupees Usage: The use of dirhams and rupees in transactions is expected to channel more remittances through formal channels.

Global Remittance Trends

• Growth in Low- and Middle-Income Countries: Remittances to these countries grew by an estimated 3.8% in 2023.
• Future Concerns: There is a risk of real income decline for migrants in 2024 due to global inflation and low growth prospects.

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