The share of remittances from the Gulf Cooperation Council (GCC) region to India has declined in 2021, the Reserve Bank of India said, reflecting a slower pace of migration and the presence of the Indian diaspora in informal sectors that were hit the most during the pandemic period.
The central bank made these observations in a recent article titled 'Headwinds of COVID-19 and India's Inward Remittances'.
Remittances are the second major source of external financing for low and middle-income countries after foreign direct investment.
"Further, the impact of COVID-19 led stressed income conditions was discernible as small size transactions gained share in total remittances in 2020-21," the RBI article said.
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As per a survey conducted by the central bank, 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.
Amid the steady migration of skilled workers, advanced economies particularly the US, the UK, and Singapore emerged as important sources countries of remittances, accounting for 36 percent of total remittances in 2020-21.
The US surpassed the UAE as the top source country, accounting for 23 percent of total remittances in 2020-21.
The share of the traditional remittance recipient states of Kerala, Tamil Nadu, and Karnataka, which had strong dominance in the GCC region, has almost halved in 2020-21, accounting for only 25 percent of total remittances since 2016-17, while Maharashtra has emerged as the top recipient state surpassing Kerala, the RBI said.
India, being the top recipient country, was expected to be one of the worst affected as the host countries were vulnerable to the twin effect of economic slowdown and slump in oil prices.
Defying the early projections, India, however, remained the top recipient country, accounting for 12 percent of total global remittances, recording a marginal decline of 0.2 percent in 2020 and a growth of 8 percent in 2021.
