Gulf Remittance to India Market Outlook: Ken Research

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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