Remittances & India in 2024

Source: The Hindu (Remittances)

Why in News?

In 2024, India received an estimated $129.1 billion in remittances, the highest amount ever recorded by any country in a single year. India’s share in global remittances reached 14.3%, a historic high since the turn of the millennium. These figures highlight the critical role remittances play in India’s economy and their importance to families relying on funds sent from abroad.

The data and trends are based on a World Bank blog article published last week, which sheds light on global remittance flows and their economic implications.

What Are Remittances?

Remittances refer to the money that individuals working abroad send back to support their families in their home country. They are especially significant for households in developing countries and often contribute substantially to their economies.

Key Insights from 2024 Remittance Data

1. Top Receivers in 2024:
  • India leads the list with $129.1 billion in remittance.
  • Mexico ($67.7 billion) and China ($48 billion) follow.
  • Other countries in the top 10 include the Philippines, France, Pakistan, Bangladesh, Egypt, Guatemala, and Germany.
remittances in $ million in 2024
2. India’s Dominance:
  • India’s share of global remittance has remained above 10% for most of the years since 2000, with notable growth in the post-pandemic years.
  • In 2024, India’s share was twice that of Mexico’s (7.5%), which ranked second globally.
3. Global Context:
  • Developing Countries: Low- and middle-income countries collectively received a record-breaking $685 billion in remittance in 2024, exceeding all other forms of financial flows.
  • Comparison to FDI and ODA: Remittances to these countries have consistently outpaced Foreign Direct Investment (FDI) and Official Development Assistance (ODA):
    • FDI has declined by 41% over the past decade.
    • Remittances increased by 57% during the same period.
compares remittances, FDI, and ODA received by low-and middle-income countries between 2000 and 2024
4. China’s Decline:
  • China’s share of global remittance dropped to 5.3% in 2024, its lowest in two decades.
  • Reasons: China’s growing economic prosperity and an aging population have reduced emigration, especially of less-skilled workers.

Role of Remittances in Different Economies

While India leads in absolute remittance inflows, the importance of remittances varies by country:

  • India: Remittances formed 3.3% of GDP in 2024.
  • Nepal: Over 25% of GDP came from remittance, showcasing their critical role in smaller economies.
  • Countries like Tajikistan, Nicaragua, Lebanon, Samoa, Honduras, and Tonga also relied heavily on remittance, with over 25% of GDP attributed to these flows.

Analysis (2000-2024)

  1. Top Receivers of Remittance in 2024
    • India leads, followed by Mexico and China, with other developing nations making up the list.
  2. Share of Global Remittance (2000-2024)
    • India’s share has remained consistently high, peaking in 2024.
    • China’s share rose in the late 2000s but has since declined sharply.
  3. Remittances as a Share of GDP in 2024
    • Smaller economies like Nepal and Tajikistan rely on remittance for over a quarter of their GDP.
    • In larger economies like India, remittance constitute a smaller GDP percentage but have a significant absolute value.
  4. Comparison of Remittances, FDI, and ODA (2000-2024)
    • Remittances have consistently outpaced both FDI and ODA in low- and middle-income countries.

Why Remittances Matter

  1. Economic Support: Remittances provide critical financial support to households, often funding education, healthcare, and daily expenses.
  2. Macroeconomic Stability: In many countries, they help balance current account deficits and fiscal shortfalls.
  3. Resilience: Unlike FDI and ODA, remittance tend to remain steady even during economic downturns, as seen in the post-pandemic period.
  4. Social Impact: By improving living standards, remittance contribute to poverty alleviation and economic growth.

Conclusion

India’s record-breaking remittance inflows in 2024 underscore the country’s global diaspora’s economic significance. As remittances continue to outpace other financial flows like FDI and ODA, their role in supporting developing economies becomes even more critical. However, reliance on remittances also highlights vulnerabilities in domestic economic structures, particularly for smaller economies where they form a large share of GDP. For India, maintaining its position as the top remittance-receiving country demonstrates the resilience and commitment of its global workforce.

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