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The World Bank Report has stated that India, the third largest economy of Asia, is set to become the first country to receive $100 billion in remittances from migrant workers abroad. Notably, India had received $89.4 billion in remittances in 2021, according to the World Bank report, which then made India the top recipient globally.

“Remittance flows to India were enhanced by the wage hikes and a strong labor market in the United States," and other rich countries, the bank said in its report. 

This means India is set to retain the highest receiver of remittances spot this year as well. According to the World Bank Report, “Remittance flows to India will rise 12% to reach $100 billion this year. That puts its inflows far ahead of countries including Mexico, China and the Philippines."

The report stated that “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".

Remittances to India are money transfers (called remittance) from non-resident Indians (NRIs) employed outside the country to family, friends or relatives residing in India.

Here are key points from the report by World Bank

-Highly-skilled Indian migrants living in wealthy nations such as the US, UK, and Singapore were sending more money home

-Remittances to low and middle-income countries have grown by 5% in 2022 to around $626 billion - around half the rate of growth seen in 2021.

-The amount of money sent back home by migrants around the world has grown by 5% in 2022

-Other top recipient countries for remittances include Mexico, China, Egypt and the Philippines

-Domestic and International shocks have affected countries like Pakistan, Bangladesh, and Sri Lanka for whom remittances earned by migrants are expected to drop this year

-Barring India and Nepal. other south Asian countries saw a decline of more than 10% in their remittances from 2021, due to the end of government incentives introduced during the pandemic

What the $100 billion remittance means for India's economy?

In recent years, many Indians have moved to well-paid jobs in high-income countries, such as the US, UK and Singapore. Remittances account for nearly 3% of India’s gross domestic product (GDP). These are also important for filling fiscal gaps.

A large source of cash for India is retained by the inflow of money from Indian's abroad. The World Bank Report comes at a time when India 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.

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.

(With inputs from Bloomberg)

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