World-topping $100 billion in remittances head to India in 2022

(Representative image)

Migrant workers from India are on track to send home a record amount of money this year, boosting the finances of Asia’s third-largest economy, which is poised to retain its spot as the world’s top recipient of remittances.

Remittance flows to India will rise 12% to reach $100 billion this year, according to a World Bank report published Wednesday. That puts its inflows far ahead of countries including Mexico, China and the Philippines.

Highly-skilled Indian migrants living in wealthy nations such as the US, UK, and Singapore were sending more money home, according to the report. Over the years, Indians have moved away from doing lower paid work in places like the Gulf. Wage hikes, record-high employment and a weakening rupee also supported growth.

Inflows from the world’s largest diaspora are a key source of cash for India, which lost almost $100 billion of foreign exchange reserves in the past year amid tightening global conditions that weakened currencies including the rupee against the dollar. Remittances, accounting for nearly 3% of India’s gross domestic product, are also important for filling fiscal gaps.

Cash transfers to India from high-income countries climbed to more than 36% in 2020-21, up from 26% in 2016-17. The share from five Gulf countries, including Saudi Arabia and the United Arab Emirates, declined to 28% from 54% in the same period, the World Bank said, citing Reserve Bank of India data.

The trend isn’t uniform across South Asia. Remittances earned by migrants from Bangladesh, Pakistan and Sri Lanka are expected to drop this year, the World Bank noted, as domestic and external shocks hit those countries especially hard.

“Migrants responded to exchange rate depreciations in home countries by sending less money through formal channels and opting for black-market premia in the parallel exchange markets,” the report said.