India is the second largest source of external financing after service exports

Financing: Remittances to India – the second-largest source of external financing after services exports – are projected to grow by 3.7 per cent to $124 billion in 2024 and another 4 per cent to $129 billion in 2025, the Economic Survey said on Monday. The primary source of remittances to India are oil exporting countries. India has the largest expatriate population and is the top remittance recipient country, according to the World Bank. In 2023, remittances to India were projected to reach $120 billion. “The outlook for remittances to India for 2024 is strong, with remittance growth expected to moderate to 3.7 per cent, reaching $124 billion in 2024,” the Economic Survey, tabled in Parliament by Finance Minister Nirmala Sitharaman, said. It said the diversification of India’s migrant pool – between a large share of highly skilled workers employed in high-income OECD markets and low-skilled migrants employed in GCC markets – is likely to provide stability to their remittances in the event of external shocks.

“India’s efforts to link its Unified Payment Interface (UPI) with source countries such as the UAE and Singapore are expected to reduce costs and accelerate remittances,” the survey said. In 2023, the increase in remittances was mainly driven by declining inflation and strong labour markets in the United States and Europe – the largest destinations for India’s skilled migrants – and positive demand for skilled and low-skilled workers in other OECD destinations as well as GCC countries. Net services receipts increased from $143.3 billion during 2022-23 to $162.8 billion in 2023-24, mainly led by rising exports of software, travel and business services. The survey said that when the value of rupee depreciates in terms of foreign currencies, money remitters get better value, be it UAE Dirham, US Dollar, British Pound or any other currency. For every one US Dollar sent by a person working in a distant country, he returns back an increased amount after converting it as required according to the foreign country he works in. Hence, remittances exhibited a positive correlation with exchange rate movement.