Overseas Indians: A force in national economy

India continues to remain the largest receiver of inward remittances in the world, thanks to the nation’s zealous international diaspora. Global presence and inspiration industry of Overseas Indians (OI), or non-resident Indians and persons of Indian origin (NRI-PIO), have also helped to bring new foreign investments to India. The nation has been projected to have received over US$65 billion in 2017 through inbound money transfers, according to the latest global remittance figures released by the World Bank. This compares with US$63 billion a year earlier. According to a World Bank paper published in 2012, based on figures released by the Reserve Bank of India (India’s central bank) in 2009, around 4.5 per cent Indian households were directly supported by inward remittances, out of which about 61 per cent was spent on welfare of the family, 20 per cent deposited with banking institutions and 7 per cent invested in new assets. Going by the same estimates, out of the US$65 billion received in 2017, around US$40 billion was spent on food, healthcare and education whereas US$13 billion and US$4.6 billion were deposited with banks and invested in new assets, respectively.

India currently has the largest diaspora in the world. Until few years back, inward foreign remittances had gone primarily into the immediate welfare of individuals and families. However, now the focus has broadened to include investment in future, asset development, as well as contribution to public welfare schemes in India. Considering there were around 31 million OIs settled across more than 200 countries at the end of 2017, the significance of the remittances inflow in the national economy has steadily increased. The figure includes nearly 16 million Indian migrants or NRIs. The concentration of NRIs at 3.3 million is the highest in Saudi Arabia. The UAE and the USA with 2.8 million and 1.3 million NRIs have been the second and third most popular destination. Meanwhile, the top destination for PIOs, or Indian origin people with foreign passports have been the USA, Malaysia and the UK with 3.2 million, 2.8 million and 1.5 million, respectively. Acknowledging the role that NRIs and PIOs play in the development of India’s soft powers in the global arena, Prime Minister Narendra Modi had to them as “members of family” during a public address in Washington last year.

Going beyond promotion of soft powers, the presence of OIs across the world has resulted in several significant economic implications for India, the foremost being the strong inward remittances received by India

Going beyond soft powers, the presence of OIs across the world has resulted in several significant economic implications for India, the foremost being the strong inward remittances received by India. Inward remittances comprise about 2.7 per cent of the national gross domestic product which is pegged at around US$2.4 trillion. Apart from an improvement in financial inclusion and overall income structure, expanded provision of financial products and services such as insurance and credit facility and propagation of a stronger savings culture have had a positive impact on the balance of payments and foreign exchange reserve of the country. Currently, India’s foreign exchange reserves stand at US$426 billion as of April 2018. Additionally, a vital multiplier effect of high volumes of inward remittances has been a general increase in consumption of products and services owing to improved affordability, increased literacy rate, disruptive innovations and increased uptake of technology. These factors have also provided entrepreneurial opportunities for India’s urban as well as rural population, bringing improved socio-economic balance. This in turn has been a shot in the arm for the “Make-in-India” initiative.

An improvement in socio-economic indices has made India a lucrative investment destination. The nation has also retained its number one spot as a Greenfield foreign direct investment (FDI) destination, a rating that has been substantiated by several international agencies. Greenfield FDI denotes cross border capital investment in production capacity. According to the fDi Intelligence report of 2017, India attracted Greenfield foreign investments worth US$62.3 billion across 809 projects in 2016. This put India at the top spot in the category, ahead of countries such as China and the USA. Separately, soft power wielded by the Indian diaspora has encouraged several countries to come to India to explore investment and partnership opportunities. For instance, OIs, constituting one of the largest ethnic groups as well as the brightest workforce in the USA’s information and technology (IT) industry, has pushed major USA corporations to set up bases in India. Appointment of OIs to lead companies such as Microsoft and Google has further boosted this confidence. As a result, cumulative foreign investment inflow into India crossed US$114 billion over April 2015 to April 2017.

One of the most significant markers of the growing importance of the OI community has been their appointment to important offices in foreign Governments. Such cases are evident in countries such a Canada, which appointed four Indian-origin Canadians in national cabinet in 2015, to Ireland, which appointed an Indian-Irish Leo Varadkar as Prime Minister in 2017. Big economies such as the UK and the USA to countries in Africa and Southeast Asia too have appointed Indian-origin officials. The rise of the OI community as a critical electoral group has further aided trade, diplomatic and cultural relations. OI communities worldwide, through their merit and sheer hard work, have ensured that India continues on its growth trajectory as a well-represented and economically powerful nation.