The amount indicates a jump by close to 12 percent from the previous year, when migrants had sent home $89.4 billion. While India has retained its top spot as the largest recipient of remittances globally, the drastic jump in the amount in 2022 is being seen as a staggering phenomenon.
However, before looking into the implications of this on India, we must start with the basics.
What are remittances? Remittances refer to amounts of money which Non-Resident Indians (NRIs) send back to India in the form of cash transfers or gifts to their family or friends.
Why Have Remittances To India Risen Drastically?
According to the World Bank report, remittances have increased due to a gradual shift in the ideal working destination for Indian migrants from Gulf countries to the developed world.
In fact, the United States (US), has replaced the United Arab Emirates (UAE) as the top source for remittances to India.
According to WB data, remittances from the US, the United Kingdom (UK), and Singapore jumped from 26 to 36 percent from 2016-2021, while the same figures from Gulf Cooperation Council (GCC) countries fell by half, from 54 to 28 percent.
"Techies in the US and UK seem to be outnumbering the old-fashioned blue-collar workers in the Gulf. So that demographic shift is showing up in the World Bank data," senior financial journalist N Madhavan told The Quint.
Hence, the composition of NRIs as a tribe sending back money to India is now loaded increasingly in favour of skilled Indians in Europe and the US – who tend to earn (and send back) far more as compared to their low-skilled counterparts in the Gulf.
However, the exceptional delays in the US over issuance of visas to Indians is sure to impact these figures, at least in the short-to-medium term.
"While we are exporting services, including skill-premium workers, to the US, the exceptional visa delays will definitely pull a lot of people out," Deepanshu Mohan, Associate Professor and Director at the Centre for New Economics Studies at the Jindal School of Liberal Arts and Humanities, told The Quint.
Hence, the US may not be the main gravitating point for Indians workers in the next three to five years.
Weakening of the Rupee
Another factor that has contributed to the steep rise in remittances is the weakening of the Indian rupee vis-a-vis the US dollar.
"A week rupee is good for sending remittances," Madhavan said. Here's how:
Assume that you’re living abroad and you want to send $1,000 home, but your family is not in a hurry to get that money. Now, say the rupee is hovering around Rs 75 per dollar. So when you send $1,000 back home, it will convert into Rs 75,000. However, when the rupee weakens to say Rs 82-83 per dollar, you get around Rs 8,000 more, which is a very good return. So people must have decided to send more money home when the rupee was weakening.N Madhavan
Is the Jump In Remittances a Positive Sign?
There are two sides of the argument regarding whether a steep rise in remittances is actually a positive development.
One side of the argument suggests that the jump in remittances is extremely beneficial to the economy.
Madhavan told The Quint that the migration that is taking place to the US – whether it is temporary or long-term – is aspirational migration, which has been good for India for the last several decades.
"As remittances increase, the foreign exchange reserves increase. In that case, the Reserve Bank of India (RBI) has a higher cushion to defend the rupee, and the economy becomes less risky," he said.
This then kicks in a virtual cycle, leading to greater investments, and hence less foreign exchange risk. Employment generation is also benefited as more people come into the workforce, he added.
The other side of the debate suggests that the hike in remittances is due to a massive 'brain drain' from the country in recent years, especially of highly-skilled Indians, which will be detrimental in the long-run.
"Growing remittances means that more and more workers from India are leaving in search for employment opportunities abroad," Deepanshu Mohan told The Quint.
A testament to this fact is the record number of Indians giving up citizenship in recent years.
The Ministry of External Affairs informed Lok Sabha recently that over 16 lakh Indians had abandoned their Indian citizenship since 2011. Out of this, a staggering 1.83 lakh Indians gave up their Indian citizenship this year itself, till end-October.
Most Indians who gave up their Indian citizenship did so to become US citizens. Lok Sabha was informed that around 78,000 Indians gave up their Indian nationality after become US citizens, up from 30,828 in 2020.
Further, According to a report of the Organisation for Economic Co-operation and Development (OECD) published in 2020, India has the largest high-skilled diaspora in the OECD area, with over 3 million tertiary-educated migrants.
The OECD currently has 38 member countries, including the US, UK, Australia, Canada, France, Germany, Netherlands, among others.
While Mohan agrees that there are some benefits of the increase in remittances, such as betterment of India's current account position and foreign currency reserves, he cautions that the exit of skilled Indians will only increase with time.
Why Are So Many Indians Settling Abroad?
According to Mohan, there are two factors contributing to this phenomenon:
1. The first and most obvious factor is economic betterment.
"People are finding it difficult to get investment opportunities to sustain themselves in India, which is something the elite class always considers. Further, since 2012, private investment levels in the country have been falling."Deepanshu Mohan
Employment generation also largely determines the pace of migration in a country.
"If employment generation is not happening at the pace at which it should, students in India are going to desert the country because they will want to go to place where they will likely find more jobs," Mohan said.
2. The second reason behind the accelerated pace of migration is the socio-political climate in India over the last few years.
"The value of Indian citizenship in the international landscape, Mohan says, has fallen amid "the rise of majoritarianism and a strong push towards the Narendra Modi brand of politics."
Hence, we can see that the communalisation and polarisation debate in India has triggered a response from several highly-skilled Indians, who now prefer settling abroad, he added.
What Are the Implications of a Jump In Migration?
The exodus of a large number of highly-educated Indians will have an impact on the power dynamics in the political and economic sectors of the country.
"Politically speaking, there might be a group which does not have the means to be that mobile for employment purposes or higher education," Mohan said, adding that It is this group which will now have more power in the domestic territory.
This will then lead to the creation of a new elite class.
"For example, the political elite now is not the same as it was under the Congress-led Centre. So we definitely have a new political class elite. This class works closely with certain business communities, which has also created a new business elite class. Sociologically speaking, we now have a majoritarian assertion being established by certain communities, particularly in parts of north India. So that is something which may consolidate even more."Deepanshu Mohan