Slowdown in OECD nations hit remittances

Remittances, which contribute around 3% of India’s GDP, might grow at a measly rate of 0.2%, thanks to economic slowdown in Organisation for Economic Cooperation and Development (OECD), the World Bank has cautioned in a report. Worse, the remittance growth curve in 2024 might also remain flat.

“Growth of remittance flows to South Asia in 2023 is expected to slow down to 0.3% in response to an economic slowdown in the OECD countries, especially in the high-tech sector in the United States, which affects demand for IT workers. Remittances to India which account for over 60% of the region’s inflows are expected to grow only by 0.2% in 2023,” said the World Bank report that was released on Wednesday.

In 2022, the top five countries in terms of remittances were India which attracted $111 bn, Mexico ($61 bn), China ($51 bn), Philippines ($38 bn) and Pakistan ($30 bn).

In 2022, remittances into India grew as much as 24% to touch $111 bn. The remittance to India constituted 63% to South Asia’s total remittances.

Incidentally, almost 36% of India’s remittances last year was traced to highly-skilled Indians in three countries – the US, the UK and Singapore. In these countries after the pandemic, labour conditions became tight leading to considerable hikes in employee compensation.

Remittances last year were also supported by the Gulf Cooperation Council countries that are, in the main, high-income destinations. The high prices of crude supported employment of a large number of Indians many of whom are less skilled than their counterparts in the US and Europe.

With the tailwind of these conditions, remittances into India from the Gulf Cooperation Council countries constituted about 28% of the total remittances India received last year.