The Boom in Remittances

What accounts for the rise in remittances? A combination of factors explains the growth of remittances into India, including some important government initiatives that have had significant impacts on their flow: –

 India’s extensive economic reforms of the early 1990s provide an important context. In 1990, India faced ‘balance of payments’ crisis. Its foreign currency assets were depleting and international confidence in Indian economy was eroding. In response, the government instituted a set of structural reforms. The resultant economic liberalization, which began in 1991. It progressively ended the state monopoly on a range of industries. It allowed foreign capital in most sectors of the economy and thereby lowered taxes and tariffs. These reforms opened new avenues for the Indian economy and presented India with a host of new opportunities.

 If the migration of skilled Indian workers to the Gulf was the dominant story of the 1970s and the 1980s, the migration of information technology (IT) workers, principally to the United States, has been the trend since the mid-1990s. Indian migration to the United States almost doubled in the 1990s. Indian software engineers became an important element of the US IT boom. This provided more scope for foreign currency in flows to India thereby increasing the amount of remittances.

 India’s progressive growth attracted money from NRIs. It provided both appreciation in assets such as property and stable interest rates on long term deposits.

The boom in remittances can be largely contributed to the above aspects.

For a decade we’ve seen steady appreciation and trends seems to continue.

One Response to The Boom in Remittances

  1. Linu Storvald says:

    one can argue that it can go both ways

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