Indian Diaspora Boosts Economy with $29 Billion in Remittances

Written on 04/05/2024
Asia91 Team

In a significant economic boost, Indians living abroad sent back $29 billion to India in the final quarter of 2023. This influx is mainly attributed to the appealing returns offered by Foreign Currency Non-Resident (FCNR) accounts, making them more favorable than traditional bank deposits in Western countries.


Key Insights:


  • High Yielding Savings Programs: Many countries, including India, have implemented special savings schemes to attract deposits from their non-resident citizens. These schemes often feature higher interest rates than those found internationally, are tax-exempt, and allow the money to be sent back home. By September 2023, non-resident Indian deposits hit $143 billion, with a year-on-year increase of over $10 billion.


  • Strong Remittance Growth Predicted: The World Bank's recent report forecasts robust growth for Indian remittances, expecting an 8% increase to approximately $135 billion in 2024. Factors like labor market conditions and inflation rates in countries where Indians reside, such as the USA, UK, and Singapore, will significantly influence these remittances.


  • Major Contributors: Together, the USA, UK, and Singapore account for 36% of the total remittance flow to India. Additionally, the Gulf Cooperation Council (GCC) countries, where many less-skilled migrants work, contribute nearly 29% of the remittances.


  • Economic Impact: These remittances are vital for reducing India's Current Account Deficit, which has been shrinking relative to the nation's GDP. The Reserve Bank of India noted that the net inward remittances in the balance of payments totaled $29 billion for the quarter ending in December 2023.


  • Future Trends: Despite the expected slower global economic activity, remittances are anticipated to continue playing a crucial role in supporting low and middle-income countries. The World Bank also highlighted the potential of leveraging these funds through instruments like diaspora bonds to support development finance.


The contributions of the Indian diaspora are proving indispensable for India’s economic stability and growth, highlighting the critical role of remittances in supporting the nation during global economic fluctuations.