• News
  • Columns
  • Interviews
  • BW Communities
  • Events
  • BW TV
  • Subscribe to Print
BW Businessworld

Inward Remittances: Indian Economy's Pillar

While many people would like to send money from abroad, few are well-versed in the technicalities associated with it

Photo Credit :


We are witnessing many private banks coming up with their own remittance schemes recently. For example, ICICI came up with ‘Smart Wire’ yesterday, and Induslnd Bank already has a ‘SWIFT Transfer’ scheme in place. These are just two examples in the ocean of schemes available today. While many people would like to send money from abroad, few are well-versed in the technicalities associated with it.

What are inward remittances?

To put it simply, it is the transfer of money to Indians from abroad. Under the ‘Liberalised Remittance Scheme’, individuals are allowed to freely remit up to USD 2,50,000 per financial year in any number of frequencies. This can be made in any currency and does not compulsorily have to be in dollars. The individual will have to provide their Permanent Account Number (PAN) before sending any money. However, there are some prohibitions, for instance, remittance for any purpose specifically prohibited under Schedule-I, like the purchase of lottery tickets, etc., or any item restricted under Schedule II of Foreign Exchange Management (Current Account Transactions) Rules, 2000 is strictly prohibited. Also, one cannot send remittances to trade in foreign exchange boards abroad. 

Did the pandemic leave a dent?

The remittance system has surprisingly been extremely resilient, despite any hang-us that the source country might have. According to the World Bank Report on Migration and Remittances, remittance flows to low and middle-income countries declined marginally to US$540 billion in 2020, only 1.6 percent below the US$548 billion in 2019. India is one of the largest recipients of remittances in the world, and the twin shock of economic slowdown and rise in oil prices should have had a resounding impact on remittance. However, this is not the case. However, as per RBI data, India remained at the top, receiving 12 percent of global remittances.

Source: RBI 

As we can see in the graph above, India rules the roost when it comes to inward remittances. It constitutes a whopping 3.2 percent of the GDP and comes mainly from Indians in the USA, UAE, and Saudi Arabia. However, as per RBI, the share of remittances from the GCC region in India’s inward remittances is estimated to have declined from more than 50 percent in 2016- 17 to about 30 percent in 2020- 21.  The US is now the number one country. It is not just individuals, but banks as well who suffer due to the change in trends. While public sector banks and cooperative banks suffered a loss of business, private sector banks and foreign banks improved their market share as private banks retained their market leadership. This trend is expected to continue, remittances are only set to increase. Remittance is a pivotal part of the Indian economy, which is set to become robust with every passing day. 

Tags assigned to this article:
remittances inflow gdp data rbi norms