New Delhi:
The share of remittances from the Gulf Cooperation Council (GCC) region to India declined in 2021, the Reserve Bank of India said, reflecting a slower pace of migration and the presence of the Indian diaspora in informal sectors most affected. during the pandemic period.
The central bank made these observations in a recent article entitled ‘Headwinds of Covid-19 and India’s Inward Remittances’.
Remittances are the second most important source of external financing for low- and middle-income countries, after foreign direct investment.
“Furthermore, the impact of Covid-19-induced stressed income conditions was observable as small-sized transactions gained a share of total remittances in 2020-21,” the RBI article said.
According to a survey by the central bank, the share of remittances from the GCC region of India’s inbound remittances is estimated to have fallen from more than 50 percent in 2016-17 to about 30 percent in 2020-2021.
Amid the steady migration of skilled workers, advanced economies, especially the US, UK and Singapore, emerged as major sources of remittances, accounting for 36 percent of total remittances in 2020-21. The US surpassed the UAE as the top source country, accounting for 23 percent of total remittances in 2020-21.
The share of the traditional recipient states of Kerala, Tamil Nadu and Karnataka, which had strong dominance in the GCC region, nearly halved in 2020-21, accounting for only 25 percent of total remittances since 2016-2017, while Maharashtra is emerged as the main receiving state surpassing Kerala, the RBI said.
India, which was the largest recipient country, was expected to be one of the hardest hit as host countries were vulnerable to the dual effect of economic slowdown and a drop in oil prices.
However, despite early forecasts, India remained the top recipient country, accounting for 12 percent of total global remittances, with a marginal decline of 0.2 percent in 2020 and growth of 8 percent in 2021.