The US is playing a significant role in the supply of foreign exchange not just for investment and trade but also in remittances from non-residents, an area hitherto dominated by the Gulf region.
A report of the Reserve Bank of India (RBI) on the impact of Covid on remittances says in 2020-21, the US surpassed the United Arab Emirates (UAE) as the top source country, accounting for 23% of total remittances in 2020-21. This corroborates with the World Bank’s report in 2021, citing economic recovery in the US as one of the important drivers of India’s remittances growth.
Remittances from overseas workers, one of the biggest suppliers of foreign exchange to India - have helped the country to live with a current account deficit. In FY21, remittances amounted to $87 billion; nearly 2.75% of GDP and the share of remittances from the Gulf Cooperation Council (GCC) region in India’s inward remittances are estimated to have declined from more than 50% in 2016-17 to about 30% in 2020-21. The steady migration of skilled workers, the US, the UK and Singapore emerged as important source countries, accounting for 36% of total remittances in 2020-21. The UAE, the US and Saudi Arabia are the three major destinations of Indian migrants for the past two decades. Out of the total migrants from India 48.6% were in the UAE, the US and Saudi Arabia as of end-2020.
Historically, the GCC region accounted for half of India’s remittances, making up for a major portion of the oil trade deficit with the region. Post-Covid, migration pattern to the GCC countries has changed significantly with a sharp contraction in the number of emigration clearances (ECs) issued since 2015, generally issued to unskilled or semi-skilled workers and women seeking overseas employment.
