Remittances have been the bulwark of dollar inflows and have lent the required comfort in financing India’s current account deficit (CAD) for decades.
This reliable stream of dollar inflows has remained steady despite the country’s CAD widening by a big margin. According to World Bank data, remittances to India totalled $69 billion in FY17, an increase of 9% from FY16. While this is far better than the decline in the preceding two years, it is a far cry from the high double-digit growth remittances showed about a decade ago.
The share of India in overall remittances of the world too has slipped, albeit marginally, to 12% from 14% in FY12. Given that a large chunk of these remittances are from gulf countries, the movement in oil prices has a big influence on it, given that these economies depend on oil for growth.
Hence, earnings of the migrant workers from India reflected in the slowdown of these economies in the aftermath of the oil price fall in 2015 and 2016. Read More