Sharp slide in India’s remittance inflows on OECD slowdown

After growing over 24 per cent to post a record-high level of $111 billion in 2022, remittance flows to India are expected to grow by only 0.2 per cent in 2023, as per the latest Migration and Development Brief released by the World Bank. Remittances are likely to get affected by slower growth in the OECD (Organisation for Economic Co-operation and Development) economies limiting employment and wage gains for migrants along with a diversion of formal remittances toward informal money transfer channels, the report said.

“The growth of remittance flows to South Asia in 2023 is expected to slow to 0.3 per cent in response to an economic slowdown in the OECD countries, especially the high-tech sector in the United States, which affects demand for IT workers. Remittances to India which account for over 60 per cent of the region’s inflows – are expected to grow by only 0.2 per cent in 2023. Remittance flows to the other six South Asian countries will also be limited by the demand for migrants in the GCC countries, where declining oil prices are expected to slow growth from 5.3 per cent in 2022 to 3 per cent in 2023, as well as the continued diversion of formal remittances toward informal money transfer channels due to worsening domestic economic conditions,” the report said. Migrants’ preference for informal relative to formal channels of money transfer in Pakistan, Bangladesh, and Sri Lanka due to worsening domestic economic conditions are expected to affect remittances. Remittance flows to low- and middle-income countries (LMICs) are estimated to grow by 1.4 per cent to $656 billion in 2023, the report said.

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In 2022, India posted an over 24 per cent growth in its inward remittances to reach $111 billion, higher than the World Bank’s earlier estimate of $100 billion. This represented 63 per cent of South Asia’s remittance flows, which grew by over 12 per cent in 2022 to reach $176 billion. “Almost 36 per cent of India’s remittances are attributable to the high-skilled and largely high-tech Indian migrants in three high-income destinations (United States, United Kingdom, and Singapore), where the post-pandemic recovery led to a tight labour market and wage hikes that boosted remittances,” the report said.