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The Reserve Bank of India said on 17 July said that the share of remittances from the Gulf Cooperation Council (GCC) region to India has declined in 2021, reflecting a slower pace of migration and the presence of the Indian diaspora in informal sectors that were hit the most during the pandemic period.

These observations were made in a recent article titled 'Headwinds of COVID-19 and India's Inward Remittances'.

Remittances are the second major source of external financing for low and middle-income countries after foreign direct investment.

"Further, the impact of COVID-19 led stressed income conditions was discernible as small size transactions gained share in total remittances in 2020-21," the RBI article said.

Also Read: India on course to become fastest growing economy despite recession fears: RBI

As per a survey conducted by the central bank, the share of remittances from the GCC region in India's inward remittances is estimated to have declined from more than 50 per cent in 2016- 17 to about 30 per cent in 2020- 21.

Amid the steady migration of skilled workers, advanced economies particularly the US, the UK, and Singapore emerged as important sources countries of remittances, accounting for 36 per cent of total remittances in 2020-21. The US surpassed the UAE as the top source country, accounting for 23 per cent of total remittances in 2020-21.

The share of the traditional remittance recipient states of Kerala, Tamil Nadu, and Karnataka, which had strong dominance in the GCC region, has almost halved in 2020-21, accounting for only 25 per cent of total remittances since 2016-17, while Maharashtra has emerged as the top recipient state surpassing Kerala, the RBI said.

As per the RBI survey, migration from Uttar Pradesh, Bihar, Orissa and West Bengal to the Gulf countries has increased in recent years. According to the Ministry of External Affairs data, more than 50 per cent of the approved emigration clearances for GCC region in 2020 were for these states.

The impact of slowdown in remittances has been quite diverse across banks. While public sector banks (PSBs) and cooperative banks (CoBs) suffered loss of business, reflected in lower number of transactions, private sector banks (Pvt.Bs) and foreign banks (FBs) improved their market share as private banks retained their market leadership followed by PSBs and FBs, it said.

India, being the top recipient country, was expected to be one of the worst affected as the host countries were vulnerable to the twin effect of economic slowdown and slump in oil prices.

Defying the early projections, India, however, remained the top recipient country, accounting for 12 per cent of total global remittances, recording a marginal decline of 0.2 per cent in 2020 and a growth of 8 per cent in 2021.

(With inputs from ANI)

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