Remittances from the Indian diaspora in the US surged through the Covid months that saw a contraction in inflows from the traditional Gulf stronghold as jobs, contact-intensive and outdoor-oriented, were lost in West Asia through the initial shutdowns.
Research by central bank economists showed that the US surpassed the UAE as the top source country, accounting for 23% of total remittances in 2020-21. “This corroborates with the World Bank report (2021) citing an economic recovery in the US as one of the important drivers of India’s remittances growth,” said the research paper by Soumasree Tewari and Ranjeeta Mishra in the Department of Economic and Policy Research, Reserve Bank of India (RBI).
“A lot of the remittance flow has got to do with the jobs and economic conditions in the host countries,” said Madan Sabnavis, chief economist at
. “Remittances from the Gulf region were almost nil because of the slowdown and many had to face job losses. But in the US where most Indians are employed in IT and other white-collar jobs, the employment situation was more stable during the pandemic restrictions. Besides, the US government also helped its individual residents with cash transfers that made it easier for them to financially support their relatives back home.”
As the top recipient, India was expected to be one of the worst affected – with a projected decline of 23% – as the host country basket of the diaspora was vulnerable to the twin effects of economic slowdown and slump in oil prices. Defying the early projections, however, India remained the top recipient, accounting for 12% of total global remittances, recording a marginal decline of 0.2% in 2020 and a growth of 8% in 2021.
“It implies that countries with a severe impact of Covid-19 received greater support than others for family maintenance from the overseas diaspora,” the RBI economists said. “This finding validates the altruism motive of remittances.” The views are of the authors and not of the RBI.
Inward remittances as reflected in private transfers in India’s balance of payments amounted to $89 billion in FY22.
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