Remittances reach a record US$ 29 bn in FY24 Q3

Remittances from overseas Indians surged to US$ 29 billion in Q3 of FY 24, fuelled by the allure of higher returns from FCNR (foreign currency – non-resident) mechanisms as compared to conventional Western bank deposits. Unlike repatriable NRI deposits, remittances constitute steady inflows that play a pivotal role in narrowing India’s current account deficit (CAD), which has been diminishing as a proportion of the country’s GDP.

Preliminary data from the Reserve Bank of India (RBI) underscores this trend, revealing a remarkable US$ 29 billion in net inward remittances during the quarter, marking the highest ever recorded figure since 1991. According to a post-Covid survey conducted by the RBI, the United States remains the primary source of remittances, accounting for 23% of the total, while remittances from the Gulf region have witnessed a decline.

Economists attribute this surge in remittances to the robust global economy, particularly in the United States, as well as year-end bonuses disbursed by overseas companies. Remittances hold significant sway over India’s economic landscape, with the nation estimated to have received upwards of US$ 100 billion in inflows in 2023, primarily allocated towards familial support and investment in assets like deposits.

The uptick in remittances, coupled with an upsurge in services exports, has played a pivotal role in curtailing the CAD to 1.2% of GDP in the December quarter. The burgeoning popularity of FCNR deposits, especially amid periods of rupee depreciation, has resulted in substantial inflows, with deposits surpassing three times the levels observed in the preceding year.

In light of the cost disparities across remittance corridors, policymakers are considering measures to broaden the scope of the Money Transfer Service Scheme (MTSS) to facilitate seamless transactions for beneficiaries in India.

Source: Economic Times