The Indian diaspora, sending home its hard-earned savings, has cemented its role in the country’s economy.
Remittances from non-resident Indians (NRIs) are projected to touch an all-time high in 2018, according to a World Bank report released last week. India will receive nearly $80 billion (Rs5.7 lakh crore) of overseas remittances this year—a 16% leap from last year’s $69 billion.
A weaker rupee, higher oil prices (for a few months) giving a fillip to the Gulf economies, and NRIs stepping in to rescue the flood-battered southern state of Kerala contributed to the higher inflows.
The rupee is the worst-performing currency in Asia in 2018. It had depreciated by nearly 15% for the year till October. Though the currency has strengthened since, it is still down by nearly 8% in the year. The depreciation prompted a spike in inflows since overseas Indians got a better value for the currencies in which they earn.
In fact, the demand was so high that remittance firms had to relax, besides other norms, their limits on despatching money, experts had told Quartz earlier.
Meanwhile, this year, crude oil prices were also on a boil. In early October, they breached the $85-per-barrel level for the first time in over four years. The higher prices led to a rebound in remittances from some of the Gulf Cooperation Council (GCC) countries, believe experts. Outflows from these countries had plummeted in 2016 on account of low oil prices.
Remittances also got a boost when the southern Indian state of Kerala suffered its worst floods in a century. While several hundred people lost their lives, its economy also took a beating. In order to help rebuild the state, its over 2.4 million overseas natives—mostly working in the Gulf—chipped in with funds, the report said.
Overall, India will retain its top spot in overseas receipts this year, followed by China, Mexico, the Philippines, and Egypt, said the World Bank.
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Global remittances, which include flows to high-income countries, are expected to grow by 10.3% to $689 billion this year, according to the report.
However, the pace of growth is expected to deteriorate in 2019. “As global growth is projected to moderate, future remittances to low- and middle-income countries are expected to grow moderately by 4% to reach $549 billion in 2019. Global remittances are expected to grow 3.7% to $715 billion in 2019,” the report stated.
Lower oil prices, a stronger dollar which has affected currency growth in nations such as Argentina and Turkey, slower manufacturing activity, and trade deceleration in some other parts are the reasons why the global remittance growth is expected to slow down in 2019.