Economy
Chart Beat: Stable net remittances a boost for India’s external position
Summary
- Remittances play a crucial role in a country’s balance of payments position.
India's outward remittances have jumped substantially over the past 10 years. The outflows increased to $31.7 billion in FY24 from $1.1 billion in FY14.
This translates into a compound annual growth rate of over 40%, which is higher than the CAGR of remittance inflows in the same period, an analysis by economists at Bank of Baroda showed.
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Outward remittances refer to money sent from India to another country. Inward remittances mean the transfer of funds into India from overseas, mainly from the non-resident Indian community.
Remittances play a crucial role in a country’s balance of payments position - more so in the case of India, given its current account deficit. India’s net remittances as a percentage of gross domestic product were stable at 3% in FY24, at about the same level as in FY23. The reading was 3.5% in FY14.
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Even so, in the current backdrop of subdued global growth, it has helped ease the pressure on India’s current account, aiding external stability.
However, going ahead, labour market trends in the US, the UK and the Eurozone, which are among the key sources of inward remittances into India, are important.
Further, stable crude oil prices should help revive remittance inflows from countries of the Gulf Cooperation Council, which have slowed.
