What is Remittances?
Historical Background
Key Points
7 points- 1.
Source of Funds: Primarily from Indian workers, professionals, and entrepreneurs residing abroad.
- 2.
Balance of Payments (BoP): Recorded under 'private transfers' in the current account of India's BoP.
- 3.
Economic Impact: Boosts household income, reduces poverty, increases consumption, and contributes to national savings and investment.
- 4.
Foreign Exchange Reserves: A major source of foreign currency inflow, helping to build and maintain healthy foreign exchange reserves, thereby strengthening the rupee and providing stability.
- 5.
Channels: Transferred through formal channels like banks, money transfer operators (e.g., Western Union, MoneyGram), and increasingly through digital platforms.
- 6.
Global Leader: India consistently ranks as the world's largest recipient of remittances, receiving over US$100 billion annually in recent years (e.g., US$111 billion in 2022, as per World Bank).
- 7.
Policy Focus: Governments often formulate policies to facilitate and encourage remittances, recognizing their macroeconomic importance.
Visual Insights
Remittances - Key Aspects
Mind map showing the key aspects of remittances relevant for UPSC preparation.
Remittances
- ●Definition
- ●Purpose
- ●Legal Framework
- ●Impact
Recent Developments
5 developmentsGrowth in digital remittance platforms offering faster and cheaper transfer options.
Impact of global economic slowdowns and geopolitical events on remittance flows.
Government initiatives to streamline and reduce costs of remittances.
Increased scrutiny on informal channels to prevent money laundering and terror financing.
Debate on the 'brain drain' vs. 'brain gain' aspect, with remittances being a tangible benefit of the latter.