Steady state growth
The latest World Bank data on remittance flows to the developing world will reassure countries like India that have come to depend on them as the most stable component of foreign exchange inflow. The increase of 6.5 per cent over the previous year, according to the Bank brief released on Wednesday, also holds the promise of better times in the next calendar year, with growth projected at 7.9 per cent and expected to reach over 10 per cent by 2014. The projected figure for India, at $70 billion in the current calendar year, is much higher than the $66 billion that the Prime Minister's Economic Advisory Council had estimated.
Remittance is the money expatriate workers send back home. The high inflows will soften the deficit in the current account, expected to end up closer to 4 per cent as easier global crude prices are offset by a depreciating rupee. Worldwide, too, remittances, including those to high-income countries, the brief says, are expected to total $534 billion in 2012 and projected to reach $685 billion by 2015. While India has emerged as the world's top recipient of this flow, China follows with $66 billion, while economies like the Philippines and Mexico lag far behind at $24 billion each. For India, remittance flow is the largest of the five streams through which foreign money comes into the economy. About the prospects for the others, the commerce ministry on Wednesday has acknowledged that exports will not reach the target of $360 billion in this fiscal. This means the trade deficit will widen. Inward tourism revenue is minuscule while the events of this past year hardly inspire confidence in India's ability to attract FII and FDI flows. Thus, remittances play a significant role in keeping the robustness of the foreign exchange story intact.