Pandemic impact: US pips UAE to become top source of remittances – Times of India

MUMBAI: The United States is playing an important role in the supply of foreign exchange not just in terms of investment and trade but also in remittances from non-residents – an area hitherto dominated by the Gulf region. Since Covid, the composition of remittances has changed, and India’s linkage to the US economy has increased.
According to an article by the Reserve Bank of India (RBI) on the impact of Covid on remittances, in 2020-21, the US surpassed the United Arab Emirates (UAE) as the top source country, accounting for 23% of total remittances in 2020-21. This corroborates with the World Bank’s report in 2021, citing economic recovery in the US as one of the important drivers of India’s remittances growth.
Remittances from overseas workers – one of the biggest suppliers of foreign exchange to India – have helped the country to live with a current account deficit. Money sent by non-residents has helped the economy during past crises, including the aftermath of the Lehman Brothers collapse, with remittances peaking at 4% of GDP in 2009. In FY21, remittances amounted to $87 billion, nearly 2.75% of GDP.

The RBI article said that the share of remittances from the Gulf Cooperation Council (GCC) region in India’s inward remittances is estimated to have declined from more than 50% in 2016-17 (last surveyed period) to about 30% in 2020-21. Amid the steady migration of skilled workers, the US, the UK and Singapore emerged as important source countries of remittances, accounting for 36% of total remittances in 2020-21.
The UAE, the US and Saudi Arabia have been the three major destinations of Indian migrants for the past two decades. Out of the total migrants from India, 48.6% were in the UAE, the US and Saudi Arabia as of end-2020.
Historically, the GCC region accounted for half of India’s remittances, making up for a major chunk of the oil trade deficit with the region. Post-Covid, the migration pattern to the GCC countries has changed significantly with a sharp contraction in the number of emigration clearances (ECs) issued since 2015, generally issued to unskilled or semi-skilled workers and women seeking overseas employment.