India’s Remittance Landscape Shifts: Advanced Economies Overtake Gulf as Key Sources

(Source – Indian Express, Section – Explained , Page – 16)

Topic: GS3 – Indian Economy

Context

India’s remittance landscape shifted in 2023–24, with advanced economies overtake Gulf nations as the top sources of inward remittances, according to the RBI’s latest survey.

Analysis of the news:

Remittance

Remittances are funds sent by overseas workers to support families back home, playing a key role in household income and the economy. In 2024, India received a record USD 129.1 billion in remittances, the highest ever for any country in a single year, accounting for 14.3% of global remittances. Mexico and China followed as the next largest recipients. Regulatory Framework: The Foreign Exchange Management Act (FEMA), 1999 regulates all foreign exchange transactions in India. Under the Liberalized Remittance Scheme (LRS), a part of FEMA, Indian residents can remit up to USD 250,000 per year for personal and investment purposes, with higher amounts requiring RBI approval. However, LRS prohibits remittances for gambling, speculative trading, and terrorist financing. Remittances are recorded under the current account of the Balance of Payments (BoP) as unilateral transfers. They represent foreign income inflows that do not create liabilities.

Shift from Gulf to Advanced Economies

• The RBI’s latest Remittances Survey shows a major shift in remittance patterns, with advanced economies (AEs) — especially the US, UK, Canada, Singapore, and Australia — now contributing over 50% of India’s total remittances in 2023-24.

• This overtakes the Gulf Cooperation Council (GCC) countries, traditionally the largest source, signaling a structural transformation in India’s diaspora and migration trends.

Declining Role of Gulf Countries

• The fall in remittances from GCC nations is due to multiple factors: the COVID-19-induced economic slump, job losses, salary cuts, and growing “nationalisation” policies like Saudi Arabia’s “Saudisation,” which prioritize domestic over foreign workers.

• This has notably reduced Indian worker presence and their ability to send money home.

Rise of Advanced Economies in Remittance Share

• Remittances from AEs are rising, with the US alone contributing 27.7% in 2023-24.

• This is attributed to higher wages, stronger currencies, and the growing population of skilled Indian professionals in STEM, finance, and healthcare.

• Indians in AEs remit more per capita than those in the Gulf due to better earnings and long-term settlement prospects.

Impact of Immigration Policies

• Restrictive immigration trends in AEs, including potential reversal of birthright citizenship and green card backlogs, could drive migrants to either return to India or send increased remittances home to mitigate financial uncertainty.

• This mirrors the remittance behavior of Gulf-based workers, who also prioritize sending money over local investments.

Student Contributions and Deskilling Risks

• Indian students abroad are increasingly contributing to remittances through education loans and post-study employment.

• However, many face “wilful deskilling” — being forced into low-skill jobs for residency pathways, particularly in Canada and the UK.

• This curtails their earnings potential and limits long-term remittance contributions.

Policy Recommendations for India

• India must strengthen skill harmonisation and facilitate international mobility agreements to ensure migrants work in jobs matching their skills.

• This would boost both remittance volumes and worker welfare. Strategic engagement with host countries can secure better job placements and protect migrants from underemployment and exploitation.

Conclusion

• The evolving geography of remittances highlights a critical opportunity for India.

• By aligning domestic skill development with global demand and securing worker rights abroad, India can maximize remittance inflows and leverage its diaspora more effectively for national development.

Practice Question: The changing dynamics of India’s remittances reflect deeper shifts in global migration patterns and domestic economic priorities.” Discuss in the context of the recent RBI Remittances Survey 2023–24. (150 Words /10 marks)