How significant are Remittances?

Table #1

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Table # 2

The above table # 1 clearly indicates that remittances are again on the rise after a decline during the year 2008-2009. The World Bank report titled ‘Migration and Remittances Factbook 2011‘ states that worldwide inflows are expected to reach $440 billion by 2010. Remittances to developing nationsare likely to reach a record figure of $325 billion from the 2009 figure of $307 billion. India ($55.0 bn) has also been ranked as the no.1 remittance recipient in 2010 followed by China ($51.0 bn), Mexico and other countries.

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Also, remittances have been resilient as compared with other resource flows (as per the table above) especially during the global financial crisis. Despite a decline in remittance inflows to developing countries in 2008-2009, these flows have remained more resilient compared with private debt and equity flows and foreign direct investment. The reasons could be as follows: –

1. Remittances are sent by the cumulated flows of migrants over the     years, not only by the new migrants of the past year or two. This makes remittances persistent over time. If new migration stops, then over a period of a decade or so, remittances may stop growing. But they will continue to increase as long as migration flows continue.

2. Remittances are a small part of migrants’ incomes and migrants continue to send remittances even when affected by income shocks.

3. Because of a rise in anti-immigration sentiments and tighter border controls in the United States and Europe, the duration of migration appears to have increased. Those migrants staying back are likely to continue to send remittances.

It is generally assumed that in a large economy like India’s, the impact of remittances is negligible. But, compared with some important factors of the economy, their relative importance is significant. How big is $ 55.0 billion as remittance revenue? It is almost one and half times of India’s defense budget and also bigger than India’s total IT exports. Remittances result in more capital inflows into the country, which in turn could lead to more investments in health, education and small business.

With better tracking of migration and remittance trends, policy makers can make informed decisions to leverage this massive capital inflow for the benefit and development of the country.


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