The United States emerges as the top source of remittance to India.
A World Bank report released in late November revealed that India, which boasts the largest diaspora in the world numbering roughly 32 million, is on track to receive more than $100 billion in remittances from abroad this year â€” the first time a single country will cross that milestone.
The 37th edition of the â€œMigration and Development Brief,â€ which lists developments in migration and remittance flows, as well as policy and regulatory changes, through the years has two significant bright spots for India.
The first bright spot is the emergence of the United States as the top source of remittance to India. In 2020-21, the U.S. accounted for 23 percent of total remittances to India. If that share is maintained, the remittance from the United States to India will touch a whopping $23 billion.Â That level of contribution will nearly equal the sum of U.S. exports to India in the first six months of the current year.
The Indian diaspora in the U.S. topping the remittance chart should not come as a surprise. With a $25 trillion economy, the United States is the richest country in the world. It is also home to the largest Indian diaspora â€” every sixth member of the global Indian diaspora lives in the U.S. â€” which is also one of the most affluent diasporas in the world.
Historically, however, the Indian diaspora in the six Gulf Cooperation Council (GCC) countries has led in cash transfers to India.
Because of this for decades, there were whispers within Indian political and bureaucratic circles that Non-Resident Indians of America, despite being very wealthy, were not doing enough to help India when it came to remittances. Â In spite of this perspective, an analysis reveals that the U.S. inability to come in first in remittances was not due to the Indian diaspora holding back funds but was attributable to the following two primary factors.
Until a decade ago, the Indian diasporas in the United Arab Emirates and oil rich Saudi Arabia were larger in size than the diaspora in the United States. Secondly, Indians living in the GCC region do not have the option of naturalization.Â Once they retire, almost every penny they earned and saved in those countries is repatriated to India. Indian Americans, on the other hand, can become U.S. citizens, raise their families in this country, and invest in homes and on retirement plans in the United States.
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Two things have changed in recent years:
First is the dramatic growth in size of the Indian diaspora in the US which is now approaching
five million. In the period from 2000 to 2019, the number of people of Indian heritage living here increased nearly two and a half times, from 1.9 million to 4.6 million.
Second is the unprecedented growth in technology, communication, and transportation, which has shortened the geographic and psychological distance between the United States and India. In recent years, in addition to sending money to family members, a lot of Indian Americans have also invested in land and businesses in India.
It a lot easier now to transfer money to India.Â Â One can also monitor investments in India real time. And, for Indian Americans on the east and west coasts of the U.S., India is only one long-haul flight away.
Because of these factors, cash flow from the U.S. to India has increased significantly. Last year, it came within five percent of remittances from the Gulf region.
These same factors have caused, remittances from the Indian diaspora in other rich countries to grow significantly. The developed countries accounted for more than 36 percent of the international remittances total last year.
READ: Indians in the US sent $10.65 billion to India in 2016: report (January 29, 2018)
The second bright spot in the World Bank report was that the remittances to India were not affected by the headwinds that are having a negative impact on the global economy.
India is the only country in South Asia that registered a double-digit growth in remittances â€” a 12 percent projection increase â€” from the previous year. In comparison, the expected growth of remittances globally is 4.9 percent.
Indiaâ€™s share of the global remittances, which is expected to touch $781 billion, will be roughly 12.6 percent, meaning every eighth dollar sent as remittance went to India. Â The second biggest recipient of remittance after India will be Mexico, which is expected to receive $60 billion, followed by China ($51 billion) and the Philippines ($38 billion), all countries with large diasporas.
Why is the continued growth in remittance important for a country like India? The answer is simple: The steady inflow of foreign currency year after year has helped India build a substantial foreign exchange reserve, which has had a stabilizing effect on its current economy and a platform for future growth.
On December 23, Indiaâ€™s foreign exchange reserve stood at $563.5 billion â€” fifth most in the world. Only China, Japan, Switzerland and Russia have more forex reserves.
Crossing the $100 billion remittance milestone shows both the financial muscle and the loyalty of those in the diaspora for India. Â They have demonstrated love for the motherland not just by talking about it but by putting their money where their mouth is.Â They are investors today and will be investors tomorrow in helping to make India a world leader.
(Frank F. Islam is an Entrepreneur, Civic Leader, and Thought Leader based in Washington DC. The views expressed here are personal.)