India’s
immense population is in a way benefitting the country. This statement, though
debatable, has been backed by the remittance sector of the country. Market Research Reports for remittance
crown India as the 2017 leading recipient of international personal remittances
claiming nearly 11% of global inflows. Despite its large contribution of more
than 55% to India’s total remittance, remittance from the Middle East has
recently witnessed a major fall of more than 9%. This fall has been attributed
to the decrease in the average annual income per Indian migrant across the
region.
The
Middle East accommodates the highest number of Indian migrants around the world
who account for nearly 20% of the total global migrants in the Middle East and
almost 55% of the total Indian migrants globally. Despite this it was revealed
that more than 40% of the migrants in the Middle East were unskilled labor.
Indians occupy various positions with nearly 10% working as trained
professionals but the majorities (around 75%-80%) however, work as laborers and
technicians in construction companies. The Gulf may appear as a haven for
employment but this does not mean it is immune to economic disturbances.
1. Remittance
Industry Research Reports
attribute the fall in remittance to the ongoing economic downturn in the Gulf
due to fall in crude oil prices, internal political disturbances , the extra
burden of taxes on expats, like the family dependent tax in Saudi Arabia and
the growing inclination to recruit locals.
2. Further Indian workers in the region have reported violations of contractual terms,
adverse working conditions, poor wages and problems related to medical insurance
and compensation claims. As a result many Indian workers have shown an interest
in returning home and more than 3,000 had requested repatriation from Indian
authorities in 2017 with most of them being from Saudi Arabia.
3. Indian policies towards the migrants heading
to the Gulf are also a cause for the decline, like the introduction of a tax on
conversion of remittances, extra regularization of foreign recruiting markets
and the recent color coding of ECR passports. Since ECR status was included on
a separate page, India’s government intended to remove this page by coloring
the passport jacket orange to identify ECR emigrants. This could create a sense
of inferiority among the ECR passport holders due to their poor economic and
educational status and further decrease labor flow. After public anger this
policy has now been abandoned.
The
effects of such unfavorable factors are visible as material trade and labor
between India and Arabia has declined. Consequently NRI remittances to India
from the GCC (Gulf Cooperation Council) countries have decreased alarmingly. A
decline of remittance inflows creates a major cause for concern due to adverse
impact on India’s balance of payment and on the domestic employment adjustment.
The government must take remedial measures to curb such decline and to prevent
the discriminatory behavior against ECR migrants.
Remittance
is a major component in terms of contribution to GDP, especially for developing
nations like India where domestic resources and national production are
insufficient to provide full employment for the existing labor supply. Also
while India’s remittance inflows are similar to China’s the share of
remittances as a percentage of GDP is higher in India which reflects a higher
dependency of India’s domestic economy on foreign remittances. Also, the
average wage in India is lower than that of the Gulf and since it is a major
source for India’s remittance inflow, a decline in earnings in the region could
adversely affect India’s employment and balance of payment.
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Contact Us:
Ken
Research
Ankur
Gupta, Head Marketing & Communications
0124-4230204
