But NRI deposits likely to help contain the damage: RBI.
Deepening global financial crisis might hit the remittances by non-resident Indians (NRIs). According to a study conducted by the Reserve Bank of India (RBI), remittance flows to India could be impacted due to a decline in income of migrant workers on account of reduction in wages or job losses following a recession in many developed countries, and slowdown in emerging markets.
“Declining oil prices, which is reducing incomes of workers in the Gulf countries, could also lead to reduced remittances flows to India. According to the World Bank’s estimates (November 2008), remittances from the Gulf region – the livelihood for millions in South Asia and the developing world – could decline by 9 per cent in nominal dollar terms during 2009 as compared to a rise of 38 per cent witnessed in 2008,” the report said.
However, according to latest available data from regional offices of RBI, there was no slowdown in inward remittances. Remittance inflows from overseas Indians, which partly depend on the interest differential and exchange rate movement, increased to $43.5 billion during 2007-08, as against $30.8 billion in 2006-07. While the share of private transfers in current receipts rose to 13.8 per cent as against 12.7 per cent during 2006-07.
| RISING, SO FAR | ||
| Year | Amount of private transfer ($billion) | % to GDP |
| 2004-05 | 21.1 | 3.0 |
| 2005-06 | 25.0 | 3.1 |
| 2006-07* | 30.8 | 3.4 |
| 2007-08** | 43.5 | 3.7 |
| *Revised, **partially revised | ||
Forty-four per cent of the total remittances to India were from North America, followed by West Asia and Europe at 24 per cent and 13 per cent, respectively.
Since September, increase in interest rate ceilings on NRI deposit schemes (at 100-175 basis points over Libor) have made it more attractive to park funds in India and has played a key role in offsetting the adverse impact on inward remittances, the RBI study said.
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Between April 2008 and January 2009, total inflows through NRI deposit schemes were estimated at $2.15 billion, as against an outflow of $406 million, according to RBI data.
“Due to the rupee depreciation in the recent period, there has been a significant rise in inflows, particularly through the rupee-denominated NRI accounts such as NRO and NR(E)RA schemes,” the report added.
Because of this, along with the weakness of the rupee vis-à-vis the US dollar, some of the remittances might have been attracted towards India which probably might have masked the adverse impact.
India is the largest recipient of remittances from non-residents. With the economic downturn, many non-residents, particularly those working in West Asia, have had to return to the country and have taken up local assignments which are less paying.
In an interview, World Bank Chief Economist Justin Yifu Lin had also said that remittances to India could be affected.
“India has seen more migration of workers to the rest of the world. It has a larger number of expatriates and high level of remittances. So, remittances will be affected to a greater degree,” he had said.
In 2007, the top five recipients of migrant remittances were India ($27 billion), China ($25.7 billion), Mexico ($25 billion), the Philippines ($17 billion), and France ($12.5 billion), according to the latest data released by the World Bank.