By Kul Bhushan
Sending money home remains the top priority for most NRIs. After
arriving - legally or illegally - in the host country, the first task is
to start earning; and then sending a major part of their earnings back
home to the family. Just like arriving can be legal or illegal, sending
money can also be legal or illegal - by official transfers through a
bank if the NRI has legal status or through the black market in case of
illegal status and/or a better exchange rate.
An estimated 5.7 million Indian workers abroad sent home $27 billion in
2007 to make India the top receiver of migrant remittances, according to
the latest World Bank data released in March 2008. Instead of the Middle
East with its estimated five million NRI workers, the US with about 2.4
million NRIs was the main remittance source.
The NRI remittances are over three times the Foreign Direct Investment (FDI)
to India. So should the Indian government look after NRIs more than
foreign investors? Yes and No. NRI remittances are primarily sent to
family members to support them for their survival. Once these
remittances improve their living standards, they are invested in
consumer goods, housing and land, and bank deposits, according to a new
IMF study published recently. Very rarely are these remittances used to
establish new businesses and industries. So India still needs to roll
out the red carpet for foreign investors because investment is one of
the drivers of economic growth. And anyway, NRI remittances make up only
about three percent of India's GDP.
"In many developing countries, remittances provide a lifeline for the
poor," said Dilip Ratha, senior World Bank economist. True. The IMF
study shows that workers' remittances can contribute up to a whopping
25-20 percent of the GDP of some countries like Haiti, Tonga and Bosnia;
20-15 percent for Yemen, Jordan, Lebanon, Haiti and Albania. Many NRIs
and Indians think that the GDP of Pakistan relies a great deal on
remittances from its workers abroad but Pakistan does not feature among
the top 20 recipient countries in this list.
The IMF report, "Macroeconomic Consequences of Remittances", by six
economists has a surprising omission - India - in its list of top 20
recipient countries for 2004, the year that has comprehensive global
data on this subject. The top slot is occupied by Mexico at $16.6
billion in remittances for 2004. Yet the World Bank's "Migration and
Remittances Factbook 2008" gives the figure of $27 billion for India in
2007. This figure cannot be for just that year because NRIs have been
sending money home for over half a century. It's not just this chart
without India as the text categorically states on page 10, "Mexico was
the largest developing country recipient of workers' remittances in 2004
with US $16.6 billion, followed by the Philippines, Lebanon, China and
Morocco (figure 3.3)". No mention of India among the top 20 although
Pakistan stands at number seven.
Without batting an eyelid, the IMF report goes on in the next sentence,
"Taking a longer term perspective, the five largest developing country
recipients of workers' remittances over the period 1990-2004 were, in
order, India, Mexico, Lebanon, Egypt and Turkey (figure 3.4)." Ahaa! For
the long haul, India enters the top spot! How did this selected amnesia
occur about India...after all, the World Bank is situated right across
the street from IMF offices in Washington?
The report's conclusions do contain some home truths. Initially, the
workers send money to support their poor families. Later, they send more
for domestic investment in white goods, housing and land; and for bank
deposits for future security. This comprises most of the remittances.
The workers also insist on how their remittances should be used since
the recipients act as their agents.
The IMF study found that the benefits of remittances in generating
higher and continued levels of consumption may come at the expense of
long-run growth. High remittances may actually decrease economic growth
in some countries due to lower productivity. So the recipient
governments should devise economic and other policies to promote
economic growth, stable exchange rates to discourage illegal transfers
and social welfare. Some of these negative outcomes can be seen in
Punjab and Kerala with high migrant workers' remittances although these
are not evident on the Indian economy as a whole driven by high domestic
investment, production and consumption.
Concludes the report, "Globalisation and the aging of some developed
country populations will ensure that demand for migrant workers remains
robust for years to come. Hence the volume of workers' remittances is
likely to continue to grow and, with it, the challenge of unlocking the
maximum social benefit from these transfers." In simple words, the NRI
money will keep flowing in more and more.
Click
here to send Gifts to India
|