Indians working overseas set a world record by sending home more than $100 billion in remittances (2012). This significant sum, which surpasses the GDP of several countries, makes up over 3% of India’s GDP. While the Gulf countries traditionally accounted for a large chunk of remittances, a new trend is emerging, driven by Indians living in developed economies and working in high-skilled jobs. We will explore the factors behind this surge in remittances and its impact on the Indian economy.
The Rise of Remittances:
The $111 billion in remittances sent by Indians working overseas in 2022 is a milestone achievement. This number not only highlights the financial support provided by Indians abroad but also tells a story of their contribution to the Indian economy. While the Gulf countries have historically been a major source of remittances, a growing number of Indians in developed economies are now contributing significantly.
The Role of Indian Tech Professionals:
A large portion of these remittances is attributed to Indian tech professionals working in countries like the United States, the United Kingdom, and Singapore. These high-skilled workers now account for a 36% share in India’s remittances. This shift can be attributed to various factors, including cultural practices, savings programs, and the availability of digital payment platforms.
Cultural Practices and Family Support:
Indian workers overseas have a cultural habit of sending a portion of their earnings back home each month to support their families. This practice is deeply ingrained and is unlikely to change in the foreseeable future. The sense of responsibility towards family sustenance drives these remittances.
Savings Programs and Better Interest Rates:
Another contributing factor is the preference of overseas Indians to keep their savings in India. Indian banks offer better interest rates on fixed deposits compared to the West, making it an attractive option for investment. According to estimates, non-resident Indians (NRIs) have around $143 billion worth of deposits in India, with this number increasing by $10 billion annually.
Digital Payments and Cost Efficiency:
Sending money home has become more affordable and convenient due to India’s digital payments platform, Unified Payments Interface (UPI). UPI, a real-time money transfer system, has been extended to overseas payments as well. Integration with Singapore’s PayNow has facilitated cross-border transactions, making it cheaper than traditional banking methods. Indians in Singapore have embraced this opportunity, with UPI recording around 100 transactions per day and close to 3,000 transactions per month by November 2022.
Future Outlook:
The Indian government plans to expand UPI to more countries, further facilitating cross-border remittances. Even without this system, Indians are expected to surpass their own record, with the World Bank predicting remittances to India to increase to $135 billion in the coming year.
The record-breaking $100 billion in remittances sent by Indians working overseas in 2022 showcases their significant contribution to the Indian economy. While the Gulf countries have traditionally been a major source, the rise of Indian tech professionals in developed economies is reshaping the remittance landscape. Cultural practices, savings programs, and the availability of digital payment platforms have all played a role in this surge. As remittances continue to grow, they provide a vital lifeline for families back home and contribute to India’s economic development.