A recent Reserve Bank of India (RBI) report reveals that advanced economies such as the United States and the United Kingdom have overtaken Gulf nations as the primary sources of remittances to India.
According to the study, titled Changing Dynamics of India’s Remittances – Insights from the Sixth Round of India’s Remittances Survey, India’s total remittances more than doubled, rising from $55.6 billion in 2010-11 to $118.7 billion in 2023-24. The RBI predicts that this figure will continue to grow, potentially reaching $160 billion by 2029.
Key Findings of the 6th Round of the Remittances Survey
- Dominance of Advanced Economies: Remittances from the US and the UK nearly doubled to 40% of total inflows in FY24, up from 26% in FY17. Specifically, the UK’s share surged from 3% in FY17 to 10.8% in FY24.
- US as the Leading Source: The US became the top contributor in FY21 with a 23.4% share, which increased to nearly 28% in FY24.
- Emerging Players: Singapore’s contribution reached 6.6% in FY24, the highest since FY17, when it stood at 5.5%. Australia also emerged as a key contributor, accounting for 2.3% of remittances.
- Declining Share of Gulf Nations:
- The UAE’s contribution fell from 27% in FY17 to 19.2% in FY24.
- Remittances from Saudi Arabia almost halved, dropping from 11.6% in FY17 to 6.7% in FY24.
- The overall share of Gulf Cooperation Council (GCC) nations (UAE, Saudi Arabia, Kuwait, Qatar, Oman, Bahrain) declined to 38% in FY24, down from 47% in FY17.
Top Recipient States
- Maharashtra remained the top recipient, receiving 20.5% of remittances in 2023-24, though this was a decline from 35.2% in 2020-21.
- Kerala’s share rose from about 10% to 19.7% over the same period.
- Tamil Nadu ranked third with 10.4%, followed by Telangana (8.1%) and Karnataka (7.7%).
- Haryana, Gujarat, and Punjab saw increased remittances, but their share remained below 5% each.
Shift in Migration Patterns Driving the Change
The shift in remittance sources reflects a broader transformation in Indian migration patterns, with skilled professionals favoring developed countries over the Gulf.
1. Stronger Job Markets in Advanced Economies
- High-paying jobs in the US, UK, Canada, and Australia attract skilled Indian professionals in sectors such as finance, medicine, and technology.
- Post-Covid US job market recovery led to increased remittances from Indian professionals.
- The UK-India Migration and Mobility Partnership simplified work visa processes, contributing to a surge in Indian migration to the UK from 76,000 in 2020 to 250,000 in 2023.
- Canada’s Express Entry and Australia’s immigration system prioritize skilled workers, offering higher wages and boosting remittances.
2. Declining Job Prospects in the Gulf
- Many Indian migrants returned from the Gulf during Covid-19 and later relocated to advanced economies for better job opportunities.
- Economic diversification and automation reduced demand for low-skilled Indian labor, particularly in the construction sector.
- Nationalization policies like Saudi Arabia’s Nitaqatand the UAE’s Emiratization prioritize local workers, further limiting job opportunities for migrants.
3. Changing Migration Trends by Region
- South Indian states (Kerala, Tamil Nadu, Andhra Pradesh, Telangana) are now sending more migrants to the US, UK, Canada, and Australia instead of the Gulf.
- North Indian states (Uttar Pradesh, Bihar, Rajasthan) continue to send large numbers of workers to the Gulf due to lower educational attainment, which limits access to skilled jobs in developed nations.
4. Rise in Education-Driven Migration
- The preference for higher education in Canada, the UK, and Australia has contributed to higher remittances from these countries.
- Canada hosts 32% of Indian students abroad, followed by the US (25.3%), the UK (13.9%), and Australia (9.2%).
Digital Transactions Powering Remittances
- The Rupee Drawing Arrangement (RDA) remains the dominant channel for inward remittances, followed by direct Vostro transfers and fintech platforms.
- Digital remittances now account for 73.5% of total transactions in 2023-24, reflecting a shift toward more efficient and transparent money transfers.
Conclusion
The transformation in India’s remittance sources highlights a shift from low-skilled labor migration to skilled professional migration to advanced economies. With stronger job markets in countries like the US, UK, Canada, and Australia, along with growing education-driven migration, remittances from these nations are expected to continue rising. Meanwhile, declining opportunities and restrictive policies in the Gulf have led to a shrinking share of remittances from the region.
