NRI deposits, NRI money, NRIs

NEW DELHI: India has displaced China and Mexico to become the top remittance receiving country in the world, according to latest data released by the World Bank. Indians working in foreign countries sent back over $25.7 billion (roughly Rs 1,28,500 crore) as remittances in 2006, followed by Mexico ($24.7 billion), China ($22.5 billion) and the Philippines ($14.9 billion).

To put the scale of the remittances in perspective, consider this: money received by India through this route is roughly the same as the country’s total estimated annual expenditure on defence, or about five times the estimated expenditure on education in 2007-08. Total income tax and wealth tax collections in the country are less than the remittances received. And they are over three times the foreign direct investment in the country in 2006.

However, the remittances make up only about 3% of India’s GDP. In several small countries, remittances are a much bigger share of the national economy. Thus, in Moldova, remittances are equivalent to 38% of its GDP. Other countries in which remittances are over 20% of GDP include Tonga, Guyana, Haiti, Lebanon, Tajikistan, Honduras and Jordan. In the Indian subcontinent, Nepal receives remittances equivalent to 15% and Bangladesh 9% of their GDP.

Among the Indian states, Kerala and Tamil Nadu provide almost half of the total immigrants from India. These are followed by Karnataka, Gujarat, Andhra Pradesh, Maharashtra and Punjab.

A study conducted by the Centre for Development Studies, Thiruvananthapuram, showed over 25% of households in Kerala have at least one person working abroad.

Sheer numbers and relatively higher skill levels appear to be driving the growth in Indian remittances. The World Bank study estimates that the number of Indian immigrants is about 10 million. Mexico and Russia are the top immigrant sending countries with an estimated 11.5 immigrants each.

Interestingly, the bulk of remittances are being sent not by highly skilled professionals like doctors or software engineers, but by more humdrum workers, wage employees and service providers.

Apart from increased international flow of labour, better means of transferring funds, like electronic transfers, are contributing to the rapidly increasing remittances.

This is borne out by the fact that the business of wire transfer companies is booming, with estimated revenues of $15 billion in 2006, and up to 30% profit margins.