India top recipient of remittances with an estimated $80 bn in 2018
10 December 2018
India continues to remain the world’s top recipient of overseas remittances this year also with its diaspora sending an estimated $80 billion back home, the World Bank said in a report on Saturday.
India is followed by China ($67 billion), Mexico and the Philippines ($34 billion each) and Egypt ($26 billion), according to the World Bank’s latest Migration and Development Brief.
Over the last three years, India registered a significant flow of remittances, from $62.7 billion in 2016 to $65.3 billion 2017. In 2017, remittances constituted 2.7 per cent of India’s GDP, the Bank said.
The Bank estimates that officially recorded remittances to developing countries will increase by 10.8 per cent to reach $528 billion in 2018, against a 7.8 per cent growth in 2017.
Global remittances, which include flows to high-income countries, are projected to grow by 10.3 per cent to $689 billion, it said.
Remittance flows rose in all regions, most notably in Europe and Central Asia (20 per cent) and South Asia (13.5 per cent), followed by Sub-Saharan Africa (9.8 per cent), Latin America and the Caribbean (9.3 per cent), the Middle East and North Africa (9.1 per cent), and East Asia and the Pacific (6.6 per cent). Growth was driven by a stronger economy and employment situation in the United States and a rebound in outward flows from Gulf Cooperation Council (GCC) countries and the Russian Federation.
As global growth is projected to moderate, future remittances to low- and middle-income countries are expected to grow moderately by 4 per cent to reach $549 billion in 2019. Global remittances are expected to grow 3.7 percent to $715 billion in 2019.
The Brief notes that the global average cost of sending $200 remains high at 6.9 per cent in the third quarter of 2018. Reducing remittance costs to 3 per cent by 2030 is a global target under Sustainable Development Goal (SDG) 10.7. Increasing the volume of remittances is also a global goal under the proposals for raising financing for the SDGs.
“Even with technological advances, remittances fees remain too high, double the SDG target of 3 per cent. Opening up markets to competition and promoting the use of low-cost technologies will ease the burden on poorer customers,” said Mahmoud Mohieldin, senior vice president for the 2030 Development Agenda, United Nations Relations, and partnerships at the Bank.
The average cost of remitting in South Asia was the lowest at 5.4 per cent, while Sub-Saharan Africa continued to have the highest at 9 per cent. No solutions are yet in sight for practices that drive up costs, such as de-risking action of banks, which lead to closure of bank accounts of remittance service providers. Another persistent factor that keeps fees high is the exclusive partnership between national post office systems and any single money transfer operator, as it allows the operator to charge higher fees to poorer customers dependent on post offices.
“The future growth of remittances is vulnerable to lower oil prices, restrictive migration policies, and an overall moderation of economic growth. Remittances have a direct impact on alleviating poverty for many households, and the World Bank is well positioned to work with countries to facilitate remittance flows,” said Michal Rutkowski, senior director of the Social Protection and Jobs Global Practice at the World Bank.
The Brief also reports progress in monitoring the SDG target for reducing recruitment costs paid by migrant workers, which tend to be high, especially for lower-skilled migrant workers.
“High recruitment costs paid by low-skilled migrant workers can be a huge drain on remittance flows. Sometimes, recruitment costs amount to more than 2 years of a migrant worker’s income. Reducing recruitment costs by improving recruitment practices can significantly increase remittance flows to poor families,” said Dilip Ratha, lead author of the Brief and head of KNOMAD. Reducing recruitment costs is a goal under SDG 10.7 for promoting safe, orderly, and regular migration.