India to gain as G20 agrees to peg cost of remittances at 5%

17 November 2014

Global Indians will get some respite once the Group of 20 developed and developing countries implement the proposed reduction in the average cost of money remittances to five per cent from the existing 10 per cent.

India, the world's largest recipient of remittances with $71 billion sent last year by non-residents, is expected to gain as much as $3.5 billion from such reduction in the remittance costs.

Taking concerns of India and other developing countries on board, the G20 on Sunday vowed to take "strong practical" measures to reduce the global average cost of transferring remittances to five per cent.

''We are committed to poverty eradication and development, and to ensure our actions contribute to inclusive and sustainable growth in low-income and developing countries. We commit to take strong practical measures to reduce the global average cost of transferring remittances to five per cent and to enhance financial inclusion as a priority.''

As part of the actions to increase investment, trade and competition that would deliver quality jobs, the G20 decided to do more to address the problem of unemployment and raise participation of women to at least 25 per cent by 2015, to bring more than 100 million women into the labour force, significantly increasing global growth and reducing poverty and inequality.

Member countries vowed to remain focused on addressing informality, as well as structural and long-term unemployment, by strengthening labour markets and having appropriate social protection systems. ''Improving workplace safety and health is a priority. We ask our labour and employment ministers, supported by an Employment Working Group, to report to us in 2015.''

India pushed for a reduction in the remittance costs of non-residents at the G20 summit that ended today, asking it to work on steps to reduce costs in sending money home from abroad which is as high as 10 per cent in some countries.

Railway minister Suresh Prabhu, who is Modi's pointsman at the deliberations, said "Indians send maximum money back to their country. India is the single largest recipient of non-resident remittances. NRIs remit close to $70 billion, more than the Filipinos and the Chinese."

The cost of remittances, at times, is as high as 10 per cent, Prabhu said.

Ahead of the summit, he said, "It's an ethical, logical and economic issue. We are pushing for some understanding in the G20 that the cost should not be more than 5 per cent."

India has been able to convince Saudi Arabia to reduce it to 3.5 per cent, he added.

In a separate G20 plan to facilitate remittance flows annexed to the communique, the grouping described as an innovative step with the potential to reduce the cost of remittance transfers the RBI's move to facilitate the receipt of foreign inward remittances directly into the bank accounts of beneficiaries under the Money Transfer Service Scheme (MTSS).

It also recognised the value of remittance flows in helping to drive strong, sustainable and balanced growth.

Noting that remittances to developing countries in 2014 are expected to reach $436 billion, far exceeding Official Development Assistance(ODA), the plan said remittances to and from G20 countries account for almost 80 per cent of global remittance flows.

"The G20 recognises the value of remittance flows in helping to drive strong, sustainable and balanced growth. Remittances represent a major source of income for millions of families and businesses globally, and are an important avenue to greater financial inclusion," it said.

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