India tops global remittance charts with $125bn in 2023
New Delhi, India – The World Bank's latest Migration and Development Brief reveals a continuing growth in remittance flows to low- and middle-income countries (LMICS) in 2023, albeit at a slower pace compared to previous years.
According to the World Bank, the report highlights India's significant position as the top remittance recipient, drawing attention to the evolving dynamics in the remittance landscape.
Remittances to LMICS grew by an estimated 3.8% in 2023, reaching a total of $669bn. Resilient labour markets in advanced economies and Gulf Cooperation Council (GCC) countries played a pivotal role in supporting migrants' ability to send money home. The report suggests a potential risk of a decline in real income for migrants in 2024 due to global inflation and low growth prospects.
In the South Asian region, remittance flows to India experienced notable growth, contributing to the overall positive trend. South Asia, as a whole, witnessed a 7.2% increase in remittances in 2023. The Indian economy, buoyed by a tight labour market in the United States and robust employment growth in Europe, outperformed previous forecasts by reaching $125bn in remittances for the year.
Despite the positive trajectory, the report underscores challenges and potential risks. The Middle East and North Africa saw a decline in remittance flows for the second consecutive year, mainly driven by a sharp drop in flows to Egypt.
Remittance flows to Europe and Central Asia also decreased by 1.4% after a significant gain in 2022.
India retained its position as the largest recipient of remittances, with an estimated $125nn in 2023. This underscores the crucial role played by the Indian diaspora in supporting families and contributing to the country's economic resilience.
The top five remittance recipient countries include Mexico ($67nn), China ($50nn), the Philippines ($40bn), and Egypt ($24bn).
The World Bank report raises awareness about the potential impact of global economic conditions on remittance flows. The expectation of weaker economic activity in several high-income countries and the prospect of weaker job markets may soften the growth of remittances to LMICS, projecting a 3.1% increase in 2024. The need for caution is emphasised, considering volatile oil prices, currency exchange rates, and the possibility of a deeper-than-expected economic downturn in high-income countries.
The World Bank's Remittances Prices Worldwide Database reveals that remittance costs remain persistently high, averaging 6.2% to send $200 as of the second quarter of 2023. The report highlights that banks continue to be the costliest channel for sending remittances, with an average cost of 12.1%.
A special section of the report emphasises the potential of leveraging remittances for development finance, particularly through diaspora bonds.
Diaspora bonds can be structured to tap into diaspora savings held in foreign destinations, providing a stable source of funds.
The report suggests that remittances have surpassed the sum of foreign direct investment and official development assistance in recent years, presenting opportunities for private capital mobilization.
India's prominence in the global remittance landscape is a testament to the significant role played by the Indian diaspora in supporting the country's economy. While challenges and risks persist, the report emphasises the need for inclusive labour markets and social protection policies to sustain remittance flows, which serve as vital lifelines for developing countries like India.