Economy
Brain gain: Skilled Indians are fuelling India’s remittance surge
Summary
Five high-income countries—the US, the UK, Singapore, Canada, and Australia—accounted for about 52% of India’s remittances in 2023-24, while hosting around 36% of all Indian migrants.
India is the world’s largest recipient of remittances, with $119.5 billion received in 2023. India also has the largest stock of international migrants in the world, estimated by the United Nations at 18.5 million in 2024, followed by China at 11.7 million. But while India has been a big recipient of remittances for a couple of decades now, shifts are unfolding within.
“The share of advanced economies in India’s inward remittances has risen, surpassing the share of Gulf economies, reflecting a shift in migration pattern towards skilled Indian diaspora," India’s central bank said following arecent survey that tracked trends and patterns in remittances for 2023-24.
As a share of gross domestic product (GDP), India’s remittances, at 3.4%, is similar to that of Mexico, but much lower than countries such as the Philippines (about 9% of GDP). For China, remittances are far less important, accounting for just 0.2% of its GDP.
Remittances will continue to be important for the Indian economy, given key trends in the global population.
Currently, India accounts for around 18.6% of the global working-age population (aged 20-65 years). According to the UN estimates, this is estimated to creep up to around 19% by 2040, by when the share of the working-age population in high-income and upper-middle-income countries is projected to fall by six percentage points.
Thus, notwithstanding a backlash against foreign-born migrants in many high-income countries, the demand for migrants to fill crucial gaps in the workforce in those countries will only persist.
High-income tilt
In 2023-24, the US remained India’s largest source of remittances by country, accounting for 27.7%, up from 23.4% in 2020-21 and 23% in 2016-17, as per the Reserve Bank of India. The share of the UK and Singapore rose by 5.2 and 4.6 percentage points, respectively.
Taken together, five high-income countries—the US, the UK, Singapore, Canada, and Australia—accounted for about 52% of India’s remittances in 2023-24, while hosting around 36% of all Indian migrants.
In contrast, the set of six Gulf countries, the other major destination of migrants, account for 45% of the number of Indian migrants, but 38% of remittances.
Thus, on average, migrants from high-income countries send more, reflecting their higher pay levels and the fact that migrants to these countries tend to be more skilled, working in white-collar jobs like software development. Jobs in the Gulf are more blue-collar in nature, in sectors like construction.
Richer destinations
Maharashtra, Kerala and Tamil Nadu accounted for about half of the remittances received in 2023-24.
However, Maharashtra saw its share fall sharply from 35.2% in 2020-21 to 20.5% in 2023-24, which may reflect the effects of anomalous economic conditions of covid. In 2016-17, the pre-covid period for which RBI has published data, Maharashtra’s share of remittances was 16.7%.
Between 2016-17 and 2023-24, the state that has seen its share fall the most is Karnataka, from 15% to 7.7%.
“Maharashtra, Telangana and Punjab accounted for the largest number of Indian students migrating abroad for education and staying back for employment opportunities, which is reflected in the increasing share of these states in India’s inward remittances," RBI said in its report.
It’s worth noting that almost all the top recipient states for remittances are relatively more prosperous, with Uttar Pradesh being the only lower-income state in the top 10.
Size bias
The RBI survey shows that about 70% of remittances are to the tune of less than ₹ 50,000. High-value remittances (above ₹5 lakh) account for 28.6% of total remittances received, but only 1.4% of the total number of remittances. In other words, high-skilled migrants, earning high incomes, are the main remitters to India.
However, to an extent, this may be an artifact of the way data is compiled. The survey covers data from banks, money transfer companies and cross-border remittance fintech companies. The average cost of sending $200 to India is around 4.9% or $10.
While this is lower than the global average, it may be high for low-income workers, nudging them to cheaper and informal means of remittance transfers such as hawala. Such remittances may not be captured in the data compiled by RBI. As more countries raise protectionist barriers and scrutiny, remittance figures should be watched.
www.howindialives.com is a database and search engine for public data
