Virendra Pandit
New Delhi: Breaking their record of remitting USD 100 billion in 2022-23, the Indian diaspora remitted an unprecedented USD 107 billion to their families back home in FY24, the media reported.
This is nearly double the combined total of USD 54 billion from foreign direct investments (FDI) and portfolio investments during the same period.
Remittances from the Indian diaspora, categorized as private transfers, reached a gross of USD 119 billion in FY24. After accounting for repatriation of income by foreign residents and other related expenses, the net private transfers amounted to USD 107 billion, the reports said.
Recent global studies and domestic research highlight a correlation between remittances and migration levels in different economies, as well as the employment conditions in countries of origin. The cost associated with remitting funds is also recognized as a significant factor influencing the volume of overseas remittances.
According to a Reserve Bank of India (RBI) survey on post-COVID-19 remittances, the United States emerged as the biggest contributor, accounting for 23 percent of the total amount. Unlike in the past, however, the remittances from the Gulf region declined during this period.
The majority of these funds came for familial support, with a portion also moving into investments, like deposits, the RBI’s findings showed.
In 2023, the US was the largest contributor to remittances globally. The leading recipients of these funds were India (USD 125 billion), followed by Mexico (USD 67 billion), China (USD 50 billion), the Philippines (USD 40 billion), and Egypt (USD 24 billion).
In December 2023, the World Bank’s report, “Migration and Development Brief,” suggested that India continued to lead globally in receiving remittances from its diaspora. This trend has persisted for over two decades, driven largely by the migration of IT professionals to North America and Europe since the 1990s.
Dilip Ratha, lead economist and principal author of the World Bank report said that remittance flows to developing nations have outpaced FDI and official development assistance in recent years. This trend is expected to continue.
The World Bank report projected a further softening in the growth of remittances to low- and middle-income countries, forecasting a 3.1 percent increase in 2024.
Under the Liberalised Remittance Scheme (LRS), resident individuals, including minors, can remit up to USD 250,000 annually for any allowable current or capital account transaction, or a combination thereof. Additionally, residents can use foreign exchange services for remittances up to USD 250,000 per annum.
This scheme excludes corporations, partnership firms, and trusts, among others.
Remittances under the LRS do not have any restrictions on frequency, but the total foreign exchange bought or remitted through any Indian source in a financial year must not exceed USD 250,000. Once an individual makes a remittance of up to USD 250,000 within a financial year, they are ineligible for further remittances under this scheme, regardless of whether investment proceeds have been repatriated.