Remittances from GCC to India hit $72b

Remittances to India are expected to rise further in 2016 and contribute significantly to economic development.

The dollar's strength against Asian currencies has triggered a surge in remittances to India from the GCC and North America - two traditional global remittance hubs - and the World Bank estimates that Indians abroad will send $72 billion home this year, a growth of 2.5 per cent compared to 0.6 per cent in 2014.
The World Bank estimates that China will come second with $64 billion in remittances, and the Philippines is third at $30 billion. Pakistan and Bangladesh also figure in the top 10 recipient countries.
In 2014, India received a total of $71 billion as remittances from across the globe. The GCC is the second-largest source for remittances after North America, accounting for around 35 per cent of the total remittances to India.
Remittances to India is expected to rise further in 2016 and contribute significantly to economic development, the World Bank said. As most Gulf currencies are pegged to the dollar, a stronger greenback means more attractive exchange rate for Asian expatriates in the region. Year-to-date, the UAE dirham is up 4.84 per cent against the Indian rupee, 3.75 per cent against the Pakistani rupee  and 4.7 per cent against the Philippine peso. In 2014, according to the World Bank, the GCC transferred $102 billion mostly to South Asian nations of India, Bangladesh, the Philippines, Pakistan, Sri Lanka and Nepal.  The amount is estimated at 6.2 per cent of the combined gross domestic product, or GDP, of the GCC states at $1.6 trillion. According to a report by Kuwait Financial Centre, the outbound GCC remittance figure was twice as high as remittances in 2010, reflecting a steady growth.While Indians in the UAE were top remitters in the world, their counterparts in the US came close with $11.177 billion in money transfers.
In Saudi Arabia, Indians headed the table with around 2.8 million workers sending $10.836 billion, while Egyptians came in second with $7.573 billion. Pakistanis were third with $4.489 billion, followed by Bangladeshis with $3.785 billion, Indonesians with $3.281 billion and Filipinos with $3.235 billion.  In 2014, the total global remittances were $583 billion. USA leads the sending markets with $131 billion transferred out, followed by Saudi Arabia ($45 billion), the UAE ($29 billion), the UK ($25 billion) and Germany ($24 billion). Meanwhile, the top five fund-receiving countries are India ($70 billion), China ($64 billion), the Philippines ($28 billion), Mexico ($25 billion) and France ($25 billion). The United States, Saudi Arabia, Germany, Russia and the UAE remain the top five migrant destination countries
In 2014, remittances from the UAE to India were estimated to be between $12.5 billion and $15 billion. This year, as the global trend shows, it is going to be much higher given the persistent weakness of the rupee against the dollar-pegged dirham,
The World Bank said in a report laments the high cost of sending money home,  averaging 7.7 per cent globally. The hidden costs in forex spread - the difference between an inter-bank currency conversion rate and the rate quoted to the sender by a bank or money transfer company - will thus eat away more than $5 billion from the remittance money coming to India this year, the bank said.
According to Sudhir Kumar Shetty, President of the UAE Exchange Centre, cost of remittances is one of the major hindrances in the flow of money across borders. "It impacts the low-wage earning blue-collared workers, who might reduce the frequency of sending money for family maintenance in the home country.  Or it could encourage them to switch to informal means of sending money home, which is not a healthy practice as it affects the receiving economy's foreign exchange reserves adversely and could create trigger unhealthy practices affecting the socio-financial fabric."
- issacjohn@khaleejtimes.com