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India is expected to be the top recipient of remittances in 2023 as inflows increase 12.4 per cent to $125 billion, said a World Bank report on Tuesday.
Mexico will come next by receiving $67 billion and China will follow it at $50 billion.
The key drivers for remittance growth in 2023 are a tight labour market in the United States, high employment growth in Europe reflecting extensive leveraging of worker retention programs, and a dampening of inflation in high-income countries.
India’s growth in remittances is expected to halve to 12.4 per cent in 2023 from a historic peak of 24.4 per cent in 2022.
The country’s share in South Asian remittances, however, is expected to increase to 66 per cent in 2023 from 63 per cent in 2022.
“The main contributing factors are declining inflation and strong labor markets in high-income source countries, which boosted remittances from highly skilled Indians in the United States, United Kingdom, and Singapore, which collectively account for 36 percent of total remittance flows to India,” the report said.
Remittances to India have also benefited from the country’s February 2023 agreement with the United Arab Emirates (UAE) for establishing a framework to promote the use of local currencies for cross-border transactions and cooperation in interlinking payment and messaging systems.
Saudi Arabia, Kuwait, Oman, and Qatar account for 11 per cent of India’s total remittances.
The World Bank said remittance growth is expected to moderate to 8 per cent in 2024, taking levels to $135 billion.
It noted that cell phones and digitalisation have revolutionised Indian fintech, helping migrants in transferring funds.
Growth in remittances to India will hinge on developments in the Gulf Cooperation Council countries (GCC), as almost 29 per cent of the flows come from its mostly less-skilled migrants in the region.
“In 2024, economic growth is projected to recover in the GCC and inflation to drop even further from its already low level. Both factors bode well for remittances flows to India,” World Bank said.
Non-resident Indian deposits in India as of September 2023 amounted to $143 billion, registering an increase of over $10 billion in one year.
