Indian diaspora breaks record with $107 billion remittance surge in FY24

According to a survey by the Reserve Bank of India on post-Covid-19 remittances, the United States emerges as the primary contributor, constituting 23% of the total amount

In the financial year 2023-24, Indians residing abroad sent an unprecedented $107 billion in remittances to their families in India, surpassing the $100 billion threshold for the second consecutive year, according to a report by The Economic Times.

This amount of net remittances nearly doubles the combined total of $54 billion from foreign direct investments (FDI) and portfolio investments during the same period.

According to the balance of payments data, remittances from the Indian diaspora, categorised as private transfers, reached a gross figure of $119 billion in FY24. After accounting for repatriation of income by foreign residents and other related expenses, the net private transfers amounted to $107 billion, the news report said.

 

Recent global studies and domestic research highlight a correlation between remittances and migration levels in different economies, as well as the employment conditions in countries of origin. The cost associated with remitting funds is also recognised as a significant factor influencing the volume of overseas remittances.

United States is the largest source of remittances

According to a survey by the Reserve Bank of India (RBI) on post-Covid-19 remittances, the United States emerged as the primary contributor, constituting 23 per cent of the total amount. Additionally, remittances from the Gulf region experienced a decline during this period.

The majority of these funds are intended for familial support, with a portion also allocated to investments such as deposits, according to the RBI’s findings on remittances, as shown by the report.

In 2023, the United States remained the largest contributor to remittances globally. The leading recipients of these funds were India ($125 billion), followed by Mexico ($67 billion), China ($50 billion), the Philippines ($40 billion), and Egypt ($24 billion).

Remittance flow to developing nations

In December, the World Bank’s "Migration and Development Brief" showed that India continues to lead globally in receiving remittances from its diaspora. This trend has persisted for over two decades, driven largely by the migration of IT professionals to North America and Europe since the 1990s.

The report quoted Dilip Ratha, lead economist and principal author of the World Bank report as saying that remittance flows to developing nations have outpaced foreign direct investment and official development assistance in recent years. This trend is expected to continue widening, he said.

The World Bank report projects a further softening in the growth of remittances to low- and middle-income countries, forecasting a 3.1 per cent increase in 2024.

What is the Liberalised Remittance Scheme?

Under the Liberalised Remittance Scheme (LRS), resident individuals, including minors, have the liberty to remit up to USD 250,000 annually (April – March) for any allowable current or capital account transaction, or a combination thereof. Additionally, residents can use foreign exchange services as outlined in Para 1 of Schedule III of FEM (CAT) Amendment Rules 2015, dated May 26, 2015, limited to $250,000.

The scheme was introduced on February 4, 2004, initially capped at $25,000. Subsequent revisions to the LRS limit have been made gradually following current macroeconomic and microeconomic conditions.

If the remitter is a minor, the LRS declaration form requires signature by the natural guardian. This scheme excludes corporates, partnership firms, and trusts, among others.

Remittances under the LRS do not have any restrictions on frequency, but the total foreign exchange bought or remitted through any Indian source in a financial year must not exceed $250,000. Once an individual makes a remittance of up to $250,000 within a financial year, they are ineligible for further remittances under this scheme, regardless of whether investment proceeds have been repatriated.