Indians Abroad Send Record $107 Billion in Remittances in FY 2023-24, Surpassing $100 Billion Mark for Second Year

In the financial year 2023-24, Indians living abroad sent a record $107 billion in remittances to their families in India, marking the second year in a row that remittances exceeded $100 billion, as reported by The Economic Times.

This massive inflow of remittances nearly doubles the combined $54 billion from foreign direct investments (FDI) and portfolio investments during the same timeframe.

According to balance of payments data, gross remittances from the Indian diaspora, categorized as private transfers, reached $119 billion in FY24. After deducting repatriated income by foreign residents and other related expenses, net private transfers stood at $107 billion.

Both global studies and domestic research indicate a correlation between remittances and migration levels in various economies, as well as the employment conditions in the countries of origin. The cost of sending money is also a crucial factor influencing the volume of remittances.

United States: The Largest Source of Remittances

A survey by the Reserve Bank of India (RBI) on post-Covid-19 remittances identified the United States as the largest source, contributing 23% of the total amount. Meanwhile, remittances from the Gulf region saw a decline during this period.

The majority of these funds are sent to support families, with some also allocated to investments such as deposits, according to the RBI’s findings on remittances.

In 2023, the United States remained the top contributor to global remittances. India was the largest recipient, with $125 billion, followed by Mexico ($67 billion), China ($50 billion), the Philippines ($40 billion), and Egypt ($24 billion).

Remittance Flow to Developing Nations

In December, the World Bank’s “Migration and Development Brief” confirmed that India continues to lead globally in receiving remittances from its diaspora. This trend, ongoing for over two decades, is largely driven by the migration of IT professionals to North America and Europe since the 1990s.

Dilip Ratha, lead economist and principal author of the World Bank report, stated that remittance flows to developing nations have recently outpaced foreign direct investment and official development assistance. He added that this trend is expected to continue growing.

The World Bank report predicts a slower growth rate in remittances to low- and middle-income countries, forecasting a 3.1% increase in 2024.

The Liberalised Remittance Scheme

The Liberalised Remittance Scheme (LRS) allows resident individuals, including minors, to remit up to $250,000 annually (April to March) for any permissible current or capital account transaction, or a combination thereof. Additionally, residents can utilize foreign exchange services as specified in Para 1 of Schedule III of the FEM (CAT) Amendment Rules 2015, dated May 26, 2015, with a cap of $250,000.

Introduced on February 4, 2004, the scheme initially had a cap of $25,000. The LRS limit has since been gradually increased in line with prevailing macroeconomic and microeconomic conditions.

If the remitter is a minor, the LRS declaration form must be signed by the natural guardian. The scheme does not apply to corporates, partnership firms, and trusts, among others.

There are no restrictions on the frequency of remittances under the LRS, but the total foreign exchange bought or remitted through any Indian source in a financial year cannot exceed $250,000. Once an individual remits up to $250,000 within a financial year, they are not eligible for further remittances under this scheme, regardless of whether investment proceeds have been repatriated.