In 2023, the inbound remittances to India witnessed a notable increase of over 12.3%, reaching $125 billion, equivalent to 3.4% of the country's gross domestic product (GDP), as per the latest estimates released by the World Bank. This marks a substantial growth from the 2022 figure of $111.22 billion. India is projected to surpass previous estimates for 2023 by an additional $14 billion, the data shows.
The World Bank's report titled ‘Migration and Development Brief’ says India ($125 billion) continues to lead globally in remittance receipts, with Mexico ($67 billion) and China ($50 billion) following in the rankings. The United States continued to be the largest source of remittances.
Anticipated remittance growth in India is projected to slow down significantly, with an expected rate of 12.4% in 2023 compared to the remarkable peak of 24.4% witnessed in 2022. This surge will further elevate India's share in South Asian remittances, reaching 66% in 2023, up from 63% in the previous year.
The data indicates Latin America and the Caribbean experienced the highest remittance growth at 8%, followed by South Asia at 7.2%, and East Asia and the Pacific at 3%.
In 2023, remittance flows to South Asia surpassed expectations, reaching almost $189 billion, exceeding earlier projections outlined in Migration Development Brief 38 by $13 billion. Similar to the trend observed in 2022, this significant surge was solely driven by remittances directed towards India, surpassing initial forecasts by $14 billion and reaching a total of $125 billion in 2023. Following a robust growth rate of 12.2% in 2022, the pace of remittance growth in South Asia moderated to 7.2% in 2023.
The notable surge in remittances in 2023, can be attributed to several pivotal factors such as, the US witnessed an exceptionally competitive labour market, contributing significantly to the increased remittance flow. Additionally, robust employment growth in Europe, fuelled by widespread utilisation of worker retention programs, played a crucial role.
The remittance outlook for India for 2024 is strong, says the World Bank. Growth in remittances is expected to moderate to 8%, taking remittance levels to $135 billion in 2024. The government’s initiatives such as the Unified Payments Interface (UPI-PayNow) linkage for cross border remittances between India and Singapore, launched in February 2023, is being extended to other countries (Das 2023) to reduce transactions costs and facilitate higher remittance flows through formal channels to India, it adds.
In the year 2023, remittance flows to Low- and Middle-Income Countries (LMICs) are projected to have attained $669 billion, primarily due to the unwavering strength of labour markets in advanced economies and Gulf Cooperation Council (GCC) nations.
Another contributing factor to India's increased remittances is the region's low remittance cost, standing at 4.3%, which is 30% lower than the global average of 6.2% in the second quarter of 2023. Remarkably, the remittance cost from Malaysia to India is the world's lowest at 1.9%.
Additionally, higher inflows from the GCC, particularly the United Arab Emirates (UAE), have played a significant role, representing 18% of India's total remittances. The February 2023 agreement between India and the UAE has further facilitated remittance flows by promoting the use of local currencies for cross-border transactions.
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