India (Commonwealth Union)_ According to the most recent data released by the World Bank, the inflow of remittances into India experienced a substantial upswing in 2023, marking a 12.3 percent increase from $111.22 billion in 2022 to an impressive $125 billion. Presently, inward remittances constitute 3.4 percent of India’s gross domestic product, underscoring the nation’s significance in the global remittance landscape. The World Bank’s “Migration and Development Brief” affirms that India maintains its position as the leading recipient of remittances worldwide, with Mexico ($67 billion) and China ($50 billion) following in the rankings.
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Notably, India commands 66 percent of all remittances directed towards South Asia, reflecting a rise from the 63 percent recorded in 2022. Analyzing the data, it becomes evident that Latin America and the Caribbean exhibited the highest growth rate in remittances at 8 percent, trailed by South Asia at 7.2 percent, and East Asia and the Pacific at 3 percent. The surge in remittances to India can be attributed to diminished inflation rates and robust labor markets in affluent source nations, fostering increased remittances from skilled Indian diaspora communities residing in the United States, the United Kingdom, and Singapore. Remarkably, these three countries contribute a substantial 36 percent to the overall remittance flow to India.
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Furthermore, greater contributions from the Gulf Cooperation Council, particularly the United Arab Emirates (UAE), significantly influenced the surge, with the UAE accounting for 18 percent of India’s total remittances, securing its position as the second-largest contributor after the United States. The report elucidates, “Remittance flows to India benefited particularly from its February 2023 agreement with the UAE for establishing a framework to promote the use of local currencies for cross-border transactions and cooperation for interlinking payment and messaging systems. The use of dirhams and rupees in cross-border transactions would be instrumental in channeling more remittances through formal channels.”
An instrumental factor in facilitating the increase in remittances was the low cost associated with remittance transactions in South Asia. Notably, the cost of sending $200 to South Asia stood at 4.3 percent, marking a 30 percent reduction compared to the global average of 6.2 percent in the second quarter of 2023. Remarkably, the remittance cost from Malaysia to India emerged as the most economical globally, standing at a mere 1.9 percent. The overall remittances directed toward low- and middle-income countries (LMICs) witnessed an estimated growth of 3.8 percent in 2023. However, the World Bank anticipates a softening of this growth to 3.1 percent in 2024, primarily attributed to the potential decline in real income for migrants amid global inflation and subdued growth prospects.
