NRI remittances kept pace in slowdown

Inward remittances of funds by Indian workers living abroad have not been impacted significantly by the global economic crisis,says a survey by the Reserve Bank of India.

Inward remittances of funds by Indian workers living abroad have not been impacted significantly by the global economic crisis,says a survey by the Reserve Bank of India (RBI). This may be attributed to a number of factors,such as depreciation of the rupee resulting in the rise in inflows through rupee denominated NRI accounts to take advantage of the depreciation,hike in interest rate ceilings on NRI deposits since September 2008 and uncertainties in oil prices,which might have induced the workers to remit their money to India as a hedging mechanism due to its relatively better growth prospects,the RBI said.

Total private transfer inflows to India were $ 27.51 billion during the six-month period of April-September 2009 as against $ 26.37 billion in the same period of 2008. Inflows were $ 46.90 bn during the fiscal 2008-09 ($43.50 bn in 2007-08),the RBI said.

It was feared that the global recession could impact migrant workers more severely. Even if there is no lay-off,workers would often have to accept lower wages as employers worldwide are seeking to cut costs in an attempt to cope with the financial crisis. Fears have also been expressed in several quarters about reverse migration of Indian labourers working in Gulf countries,which may result in decline in remittances and NRI deposits in India, it said.

While larger numbers of the bank branches,that were surveyed,have reported negligible impact of global crisis on flow of remittances,responses have been mixed across the regions. Majority of the respondents in Delhi and Chandigarh centres said that ongoing recession led to decline in the remittances,while in Ahmedabad centre,the majority of the respondents did not see any significant decline in the flows of remittances in the region. Again,respondents in Kochi region observed substantive decline in remittances while respondents from Jaipur region had mixed observations,the RBI said.

North America continues to be the most important source region of remittances to India despite its share in total remittances falling to 38 per cent (44 per cent during the 2006 survey). This is in line with the fact that a large proportion of migrants to North America (US and Canada) work in software and other Information and Communication Technologies (ICT) related areas which have relatively higher average earning levels. The Gulf region accounts for an average of 27 per cent of the total remittance inflows to India,with major source countries being UAE and Saudi Arabia, the survey said.

According to the RBI study,a predominant portion of the remittances received (61 per cent) are utilised for family maintenance. On an average,about 20 per cent of the funds received are deposited in the bank accounts and 4 per cent of the funds received are invested in land/property/equity shares. Notably,the share of investment in land/property/equity shares in the current survey (November 2009) registered a significant decline as compared to the share of 20-25 per cent recorded in the previous survey conducted in July 2006. A relatively higher portion of remittances are put in bank deposits in centres such as Ahmedabad,Chandigarh,Delhi,Jaipur and Kochi, the RBI said.

The regional pattern of investment reveals that a relatively smaller share of the total remittances is invested in land/ property/equity shares. The investment in land/property/equity shares is comparatively large in centres like Ahmedabad,Mumbai,Hyderabad and Bangaluru. The share of bank deposits in total remittances is also quite significant in most of the centres. More than 25 per cent of the total remittances are kept in bank deposits in centres such as Ahmedabad,Delhi,Kochi and Chandigarh, it said.