Recalibrating to Uncertain Remittances

February 22, 2018
1 year

What is the issue?

  • Migrant remittances from the West and West Asia have been displaying uncertain trends lately, due to various factors.
  • Indian policymakers would have to decipher this trend early to appropriately deal with the fallouts.

How has remittance benefited economies? 

  • After the global financial crisis in 2008, the developing countries have become the prime engines driving global economic growth and recovery.
  • Emerging economies like India and China have become increasingly influential in determining global economic policies.
  • Notably, these economies have benefited from increasing globalisation and the growing movement of goods and people between countries.
  • Consequently, they are among the largest recipients of global remittances.
  • Notably, 23 countries, led by India and followed by China, Philippines, Mexico, Pakistan and Nigeria, receive over 80% of global remittances.
  • Impacts – Remittances has helped lift millions out of poverty and unemployment in the above mentioned low to middle-income countries.
  • It has also enhanced their standard of living and human development.
  • The positive impact of migration on economic growth and development through increased remittances is hence well established.
  • The experience of Kerala, which receives remittances equalling 36.3% of its state GDP, is a testimony to this.

How does India’s remittance profile fare?

  • India has witnessed sharp remittance growth since 1991, which grew from $2.1 billion in 1991, and touched $70.4 billion in 2014.
  • Since then, the value of remittances to India has seen modest declines - $68.9 billion in 2015 and $62.7 billion in 2016, although 2017 closed at $65.4 billion.
  • However, considering the cranky debate on migration around the world, considerable uncertainties about remittances remain.
  • Notably, India receives about 56% of its remittances from migrants in West Asia, with the remainder from mainly North America and Europe.
  • But rapid changes in the economy and the socio-political climate in emigrant destinations have had an impact on remittances.

What is the churn in West Asia?

  • Arab Spring in 2010 and subsequent counter-revolutionary moves by states had a drastic impact on its immigration policies.
  • Declining oil prices and sluggish regional economies, especially in the Gulf Cooperation Council (GCC) countries, aggravated the situation.
  • Consequently, most governments decided to prioritise filling their workforce with their nationals, which meant stricter visa norms.
  • Visa Regime - Notably, only UAE continues with its pre-2008 liberal visa regime, whereas, Oman has had a strict immigration policy since 1998.
  • The other countries (Bahrain, Kuwait, Qatar and Saudi Arabia) have now started looking increasingly inwards since the spring.
  • This move was clearly to appease its increasingly restless youth, many of whom were unemployed and participated in protests.
  • Actions - Saudi government enacted “Saudi Nationalisation Scheme” in 2011 with a view to reducing unemployment among Saudi nationals.
  • This included incentives for companies performing in accordance with this system and regularisation of over 5 million temporary workers.
  • Crackdown on illegal migrants, increased control over foreign workers and the apathy to curtain harassment of foreign labourers has also become common.   
  • It is evident that the younger natives of West Asia, who are increasingly becoming educated, will replace migrants in the coming years.

How will this impact Kerala?

  • Since the 1970s, the Gulf region has attracted millions of Malayalis, and their remittances charted a unique economic growth path for the state.
  • With remittance accounting to almost a third of the state GDP, Kerala presents a unique case as no other large State in India depends so much on remittances.
  • The decline - Kerala Migration Surveys, conducted by the Centre for Development Studies, has studied migration from Kerala since 1998.
  • Its 2016 report notes that the Malayali migrant community had for the first time shrunk by 10% from the previous and currently numbers 2.2 million.
  • This was on account of two aspects - nationalisation policies in destination countries and enhanced aspirations of the now richer and educated Malayalis.
  • Unskilled and semi-skilled Malayalis in the Gulf are now being replaced by Philippinos, Nepalis and other Indian migrants from Bihar, Rajasthan and UP.
  • While the more skilled Malayalis now seem to be eyeing better jobs, the 10% decrease in migration for sure will dent the remittance significantly.
  • Economic Implications - Remittances to Kerala exceeded Rs. 71,000 crore in 2014 and a migrant typically supports 3 to 4 family members back home.
  • A third of the population directly benefits from migration and another third benefit indirectly through multiplier effects.
  • If the State does not identify alternative means of employment and revenue generation, it will turn out to be problematic.
  • Notably, returned emigrants account for 1.2 million of Kerala’s population and the State thus faces the huge challenge of reintegrating them into the economy.
  • This demands innovative policies targeted at equipping the workforce to find jobs and also promoting entrepreneurship and investments.
  • The Hope - Lower migration may not necessarily be a disaster for the State if local resources are channelized properly for enhancing opportunities.
  • This new trend might, in fact, lead to bettering the total scenario as migration comes with a lot of social costs and emotional costs.
  • Notably, while a migrant worker might make more money, he/she also has to leave a family behind, and live a life of hardship in a foreign land.
  • Also, women, children and elderly parents are left back to fend for themselves and deal with loneliness, anxiety and inadequate care.  

How does the future look?

  • North America, which is currently a major remittance sending regions of the world, is expected see dampened migration due to the Trump presidency.  
  • Europe, which surpasses even the Gulf region in remittance, is currently facing its worst refugee crisis since the days of the 2nd world war.
  • This has already fuelled xenophobic and anti-immigration sentiments across the continent and has resulted in the rise of rightist parties.
  • It seems obvious that migration and remittances will take on a more prominent role in internal and international politics in the near future.
  • This is in striking contrast to the latter part of the last century, which was commanded by liberal ideas on migration and open borders.
  • As the richer nations start relying more on its own workforce and tightly controls borders, the poorer nation will have to rely less on remittances.
  • Therefore, it is imperative that developing nations that have relied on remittances to recalibrate strategies go ahead.


Source: The Hindu


Login or Register to Post Comments
There are no reviews yet. Be the first one to review.
UPSC Admissions 2019