India Leads Global Remittances

December 19, 2023

According to the latest report from the World Bank, India is set to become the largest recipient of remittances, with inflows expected to increase by 12.4% to $125 billion in 2023, constituting 3.4% of the country’s gross domestic product.

Drivers of Remittance Growth in 2023

The report identifies several key drivers behind the surge in remittances for 2023. These include a historically tight labor market in the United States, substantial employment growth in Europe due to worker retention programs, and a reduction in inflation in high-income countries.

Global Trends

While the projected inflows are estimated to reach $135 billion in 2024, the growth rate is expected to moderate to 8% compared to the robust 12.4% in 2023. Although this growth rate is half of the previous year’s 24.3%, it significantly outpaces the 3.8% growth recorded by low- and middle-income countries.

Positive Outlook for 2024

The report expresses confidence in India’s remittance outlook for 2024. It cites factors such as marginal increases in unemployment rates in the United States and the United Kingdom, coupled with declining rates in Singapore. The sustained remittance flows from India’s highly skilled migrants are expected, contingent upon geopolitical factors and developments in Gulf countries.

Role of India’s Fintech Revolution

India’s fintech evolution plays a crucial role in facilitating remittance inflows. The government’s initiatives, such as the Unified Payments Interface (UPI-PayNow) linkage with Singapore, aim to reduce transaction costs and enhance remittance flows through formal channels.

Global Corridor Costs and Gulf Country Support

Malaysia and Singapore emerge as the least expensive corridors for transactions in 2023, while Japan, South Africa, and Thailand to India face the highest transaction costs. The report emphasizes the significant support from Gulf countries, particularly the United Arab Emirates, which, through a 2023 agreement, promotes the use of local currencies for cross-border transactions.

Leveraging Local Currencies

The agreement with the United Arab Emirates is highlighted as instrumental in channeling more remittances through formal channels. The use of dirhams and rupees in cross-border transactions is expected to positively impact the remittance landscape, contributing to India’s growing financial inflows.

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