Source: The post India’s Remittance Landscape Is Rapidly Transforming has been created, based on the article “Examining the RBI’s remittances survey” published in “The Hindu” on 29 May 2025. India’s Remittance Landscape Is Rapidly Transforming.
UPSC Syllabus Topic: GS Paper3-Indian Economy and issues relating to planning, mobilisation, of resources, growth, development and employment.
Context: Remittances significantly contribute to India’s external financial stability. Recently released RBI data highlighted record remittances of $118.7 billion in 2023–24, surpassing foreign direct investment (FDI) inflows and financing more than half of India’s merchandise trade deficit. This underscores remittances’ critical role amid global economic uncertainties.
Shifts in Remittance Sources
- Emerging Dominance of Advanced Economies: Advanced economies (AEs) now dominate remittance inflows, with the U.S. alone contributing 27.7%, an increase from 23.4% in 2020–21. Collectively, the U.S., U.K., Canada, Australia, and Singapore account for 51.2%, surpassing Gulf Cooperation Council (GCC) countries at 37.9%.
- Changing Migrant Profiles: The shift reflects India’s changing migrant demographic from predominantly low-skilled workers in Gulf nations to high-skilled professionals and students in AEs. Such migrants usually earn higher, more stable incomes and remit less cyclically sensitive amounts.
- Long-term Stability and Risks: While AE migrants provide steady remittance flows, their deeper integration abroad may eventually reduce their remittance frequency. Additionally, remittance inflows might become vulnerable if host-country immigration policies adversely affect high-skilled migration.
Concentration of Remittance Values
- High-value Transactions Dominate: In 2023–24, transactions above ₹5 lakh constituted nearly 29% of total remittance value despite representing only 1.4% of transactions. This indicates increasing dominance by high-earning, professional Indian migrants.
- Implications for Vulnerability: While high-value remittances reflect diaspora upward mobility, their concentration creates vulnerabilities. Any negative shift in immigration policies could disproportionately impact overall inflow stability.
Digital Transformation of Remittances
- Growing Digital Remittance Channels: Digital channels now handle 73.5% of remittance transactions, significantly reducing transaction costs. Sending $200 to India costs an average of 4.9%, below the global average (6.65%) but still above the Sustainable Development Goal target of 3%.
- Uneven Adoption Across Countries: Digital adoption varies significantly: UAE (76.1%) and Saudi Arabia (92.7%) lead, while Canada (40%), Germany (55.1%), and Italy (35%) lag. These differences highlight infrastructural and regulatory constraints needing policy intervention.
- Policy Focus on Digital Payments: India must strengthen cross-border digital payment systems to enhance efficiency, reduce costs, and maintain remittance flows within formal channels.
Regional Disparities in Remittance Distribution
- Persistent Geographic Inequality: States like Maharashtra, Kerala, and Tamil Nadu received approximately 51% of total remittances. In contrast, Bihar, Uttar Pradesh, and Rajasthan combined received less than 6%.
- Need for State-specific Skill Initiatives: Disparities result from uneven migration-enabling resources such as language training and credential pathways. National skilling missions should address state-specific needs to prevent perpetuating inequality.
Data Gaps and Policy Implications
- Missing Household-level Insights: Current data lacks insights into household usage of remittances, hindering assessment of their developmental impact beyond macroeconomic stability.
- Enhancing Developmental Impact: Evaluating whether remittances fund consumption or investment is essential. Policies promoting savings-linked remittance products, targeted financial literacy, and investment incentives could significantly enhance remittances’ long-term developmental impact.
Question for practice:
Examine how recent shifts in remittance sources and patterns are influencing India’s external financial stability and developmental priorities.
