India’s net personal transfers — current transfers between resident and non-resident households — declined by 12.19 per cent during the quarter ended June 2016 in line with the decline in oil prices and slowdown in the global economy.
According to the Reserve Bank of India data, while net personal transfers were $15.73 billion in April-June 2015, they declined to $13.82 billion in the quarter ended June 2016. Of this, direct workers’ remittances fell three per cent to $8.82 billion during the three months as against $9.09 billion in the last year’s quarter, the RBI data shows.
In fact, workers’ remittances were $7.98 billion in quarter ended June 2012 and $ 6.92 billion in the quarter ended March 2013.
A World Bank report, released last week, said remittances to the region are expected to decline by 2.3 per cent in 2016, following a 1.6 per cent decline in 2015. “Remittances from the GCC countries continued to decline due to lower oil prices and labour market ‘nationalization’ policies in Saudi Arabia,” World Bank report on remittances said.
In 2016, remittance flows are expected to decline by 5 per cent in India and 3.5 per cent in Bangladesh, whereas they are expected to grow by 5.1 per cent in Pakistan and 1.6 per cent in Sri Lanka, World Bank said.
This is happening at a time when in 2016, remittance flows to LMICs (lower and middle income countries) are projected to reach $442 billion, marking an increase of 0.8 per cent over 2015 (figure 1 and table 1). “The modest recovery in 2016 is largely driven by the increase in remittance flows to Latin America and the Caribbean on the back of a stronger economy in the United States; by contrast remittance flows to all other developing regions either declined or recorded a deceleration in growth,” it says.
“A sustained rise in commodity prices, particularly crude oil would boost the import bill relative to our baseline forecast while simultaneously counteracting the risk posed by lower remittances, particularly from the Middle East,” said an ICRA report.
Besides weak economic growth in remittance-source countries, cyclical low oil prices have dampened the growth of remittance flows from Russia and the Gulf Cooperation Council (GCC) countries. More worrisome are structural factors such as de-risking by commercial banks, the labour market ‘nationalization’ policies in some GCC countries (that discourage demand for migrant workers) and exchange controls in many countries faced with adverse balance of payments and falling international reserves.
Exchange controls in Egypt, Nigeria, Sudan and Venezuela have increased black market premiums on exchange rates, encouraging a diversion of remittances to unrecorded channels. De-risking, the closing down of bank accounts of money transfer operators due to anti-money laundering regulatory risks, has prompted many international banks to close correspondent bank accounts of money transfer operators, disrupting remittance flows, WB said.
Top 10 remittance recipients in 2015 were: India ($72.2 bn), China ($63.9 bn), the Philippines ($29.7 bn), Mexico ($25.7 bn), France ($24.6 bn), Nigeria ($20.8 bn), Egypt ($20.4 bn), Pakistan ($20.1 bn), Germany ($17.5 bn) and Bangladesh ($15.8 bn). The largest source country for migration is India (13.9 million), followed by Mexico (13.2 million) and Russia (10.9 million). However, as a share of population, the top emigration countries are small island nations such as Guyana (60.8 per cent), Samoa (60.2 per cent) and Jamaica (40.4 per cent).
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