December 19, 2023
The remittances are projected to increase at 12.4% to US$ 125 billion in 2023
It is nearly four times the growth seen in low- and middle-income countries
Remittance inflows will likely reach US$ 135 billion
Cross-border remittances between India and Singapore, launched in February 2023, are expected to contribute to higher remittance flows
India is expected to become the largest recipient of remittances, with a projected increase of 12.4% to US$ 125 billion in 2023, accounting for 3.4% of the country’s gross domestic product, according to the latest report from the World Bank.
The report attributes the critical drivers of remittance growth in 2023 to a historically tight labour market in the United States, robust employment growth in Europe due to extensive worker retention programs, and a dampening of inflation in high-income countries.
Although the growth rate of remittances at 12.4% in 2023 is lower than the 24.3% recorded in the previous year, it is nearly four times the growth seen in low- and middle-income countries, which stood at 3.8%.
Looking ahead to 2024, the report predicts that remittance inflows will likely reach US$ 135 billion, with a moderated growth rate of 8% compared to the previous year. The outlook for India in 2024 is vital, with sustained remittance flows expected from highly skilled migrants, contingent upon factors such as unemployment rates in the United States and the United Kingdom and developments in Gulf countries.
The report highlights that India’s fintech system, including initiatives such as the Unified Payments Interface (UPI-PayNow) linkage for cross-border remittances between India and Singapore, launched in February 2023, is expected to contribute to higher remittance flows through formal channels by reducing transaction costs.
The five least expensive corridors for remittances in 2023 are reported to be Malaysia and Singapore, while transactions from Japan, South Africa, and Thailand to India incur the highest costs.
Additionally, the report emphasises the support from Gulf countries, the second-largest source of remittances for India after the US, the UK, and Singapore. The February 2023 agreement between India and the United Arab Emirates to promote the use of local currencies for cross-border transactions is expected to facilitate remittance flows through formal channels further.
In summary, the report forecasts a significant rise in India’s remittances, with an increase of US$ 14 billion from 2022, a 12.4% growth in 2023, and continued positive momentum in 2024 with an 8% rise, supported by factors such as a strong labour market, employment growth, and advancements in the fintech system.
Source: Economic Times