Inward Remittances to India Cross $100 Billion for the First Time in 2022

The inward remittances to India exceeded $100 billion for the first time in 2022, a year-on-year (YoY) growth of 12%, according to the World Bank’s Migration and Development Brief. These are private remittances or transfers of money from NRIs to family and friends. These are the highest inward remittances to any country in the world, a long way ahead of the second place Mexico which is at $58.5 billion in 2022.

Wealthy Indian Diaspora and Weaker Rupee Help

An estimated total of 18 million Indians are living out of their country of birth. It is the biggest diaspora around the globe. Unlike immigrants from many other developing nations, Indians are involved in relatively high-paying jobs. Qatar takes the top spot in terms of remittances to India with $727 million transferred to India, followed by Australia and Saudi Arabia with $593 million and $533 million respectively. 

The persistent and rapid growth in personal transfers to India declined in FY21 owing to the COVID-19 pandemic. It is presently growing at an exponential rate.

According to Bloomberg, in the Gulf area, where many Indians have relocated, vaccination and the reinstatement of transit meant that migrants could return to work. The rise in oil prices also allowed foreign employees to send greater sums of money home to their families.

Highly skilled Indian migrants from the United States, the United Kingdom, and Australia were also transferring additional funds home, aided by job support schemes during the epidemic. According to the World Bank, Indians may also be taking benefit of the Indian Rupee's weakening compared to the US  dollar.

The Big Picture

Inward remittances increased even as cross-border foreign direct investment (FDI) seemed to have decreased. According to figures from the Department of Promotion of Industry and Internal Trade, FDI in India declined 15% year on year to $36.75 billion from April to December this fiscal year.

Although India's merchandise trade is frequently in deficit, these remittances have delivered a considerable boost to the country's current account. 

A recent increase in service exports has also helped the government to retain a good balance of payments situation. Balance of Payment refers to the connection between the balance of international payments and the flow of domestic income.

In Q3FY23, India's current account deficit (CAD) was $18.2 billion, or 2.2% of GDP. It was predicted to represent 4.4% of total GDP in Q2FY23. With a decrease in the average trade deficit in Q4FY24 as compared to the previous quarter. 

Analysts estimate that CAD would be $77-80 billion in FY23, amounting to 2.3% of GDP, which experts consider to be a safe position.