How the colour of NRI remittances into India is changing

For a long time, India has relied heavily on non-resident Indian (NRI) deposits to fill the forex flow gap. With attractive rates of interest, most of the NRIs found it a much better option to invest in India, since many of them eventually planned to come back. But there is a quiet shift happening in NRI remittances. In the past, Indian workers would go to the Gulf Cooperation Council (GCC) region in Middle East and West Asia and repatriate money. As you can see in the table below, at over $140 billion, NRI deposit stock is substantial.

Non-Resident Deposits
(US$ Million)
Scheme	Outstanding				Flows
	2021-22	2021	2022		2021-22	2022-23
		May	April	May	April-May	April-May
	1	2	3	4	5	6
1 NRI Deposits	1,39,022	1,44,288	1,39,202	1,37,089	2,427	422
1.1 FCNR(B)	16,918	19,876	16,135	15,910	–597	–1,008
1.2 NR(E)RA	1,00,801	1,05,245	1,01,559	99,928	2,691	1,070
1.3 NRO	21,303	19,166	21,508	21,250	333	360

Data Source: RBI

However, that flow has slowed for several reasons. For starters, many of the nations like Iraq, Iran and Yemen are having internal problems. The governments of the most prosperous Middle East nations like Saudi Arabia and the UAE have tried to use their oil riches to create more opportunities for the local population. Above all, the big oil companies are no longer investing billions of dollars into prospecting for new oil, so the demand for labour from India in the GCC region has surely gone down.

India still a leader in NRI remittances

Thanks to a combination of high returns on Indian NRI deposits and the urge to send funds back to India, India has been the largest recipient of NRI remittances over last 3 years. As one can see from the chart below, even China, Mexico and Philippines that have a relatively large migrant population working in other countries, the remittances are relatively smaller compared to the $85-$90 billion of annual remittances that India gets from NRIs.

There is one thing that stands out about the NRI remittances into the developing economies. The flows have remained robust even during the COVID years, despite the pressure on income levels that a lot of NRIs did face during this period. 




However, what is more interesting is the source of NRI flows into India. Before we get into that, let us quickly look at how the lure of migrating to the GCC region has been reducing, both due to demand and supply factors. Consider these numbers. In 2015, the total number of Indian emigrants to the GCC was 7.60 lakhs. It fell to 3.70 lakhs in 2017, to 3.50 lakhs in 2019 and further to 0.90 lakhs in 2020. While the fall in 2020 could be partially attributed to the pandemic effect, the migration trend is definitely downward.

If not GCC, where is NRI money coming from?

That is the million dollar question. There have been some very interesting shifts in terms of NRI remittances in the last few years. As late as 2016-17, the GCC countries accounted for 50% of total NRI remittances into India. That has fallen sharply to just about 30% in 2020-21, an extremely sharp fall in 4 years. At the same time, the US, UK and Singapore; which accounted for less than 25% of remittances in 2016-17, accounted for over 36% of total remittances in fiscal year 2020-21. In FY21, for the first time since NRI deposits were permitted into India, the overall market share of the US at 23.4% was higher than UAE at 18%.

Country-wise Share in Inward Remittances, 2020-21
Source Country	Share in Total Remittances (%)
United States	23.4
United Arab Emirates	18.0
United Kingdom	6.8
Singapore	5.7
Saudi Arabia	5.1
Kuwait	2.4
Oman	1.6
Qatar	1.5
Hong Kong	1.1

What has led to this shift away from GCC and in favour of the more developed markets like the US, UK and Singapore? There are 2 underlying trends here. Firstly, the outbound NRIs from India were, in the past, largely from Kerala and Tamil Nadu and they were headed to the GCC region. Now the emigrants from these states are facing competition at two levels. There is competition at the level of states with labour from UP, Bihar and Bengal willing to work in the GCC region at lower pay. At the same time, there are smaller countries like Pakistan, Philippines and Sri Lanka where labour costs less.

There is one more reason. Over the years, the quality of Indian manpower has improved with greater accent on education. This has led to greater demand for Indian workers in the more advanced countries like the US, UK and Singapore, where jobs are not necessarily blue-collared but can also be white-collared. That also explains the rise in remittances from the NRIs in these countries. Above all, data shows that there has also been a sharp reverse migration from the GCC, but that is yet to be ratified on a sustained basis.

Recipient states of NRI remittances have also changed

There is also an interesting shift in the nature of remittances coming into Indian states, which is in sync with the change in the source of remittances.

State-wise Share in Inward Remittances, 2020-21
Destination State	Share in total remittances (%)
Maharashtra	35.2
Kerala	10.2
Tamil Nadu	9.7
Delhi	9.3
Karnataka	5.2
Andhra Pradesh	4.4
Uttar Pradesh	3.7
Gujarat	3.2
Punjab	3.0
Jharkhand	1.9
Bihar	1.4
West Bengal	1.4
Rajasthan	1.2
Haryana	1.2
Goa	1.1
Tripura	1.1

For a long time, it was the states of Kerala and Tamil Nadu that dominated the NRI inflows, predominantly from the GCC region. Today, the inwards remittance share of Maharashtra is more than thrice that of Kerala. At the same time, Delhi has now raised its NRI remittance share almost at par with the state of Tamil Nadu. As the nature of emigration is moving more towards value addition, the state focus is also shifting out of the traditional states like Kerala and Tamil Nadu, towards Maharashtra and Delhi.

Here is what we take away from the Remittance Survey

There are three key inferences that logically follow from the NRI Remittance Survey.
a)      The Indian diaspora is gravitating away from the GCC region and towards developed nations. That is evident in the remittance share.


b)      While the pandemic stress has not reduced the value of remittances, it has resulted in smaller remittance sizes.


One of the reasons for NRIs finding remittance attractive is that India has one of the lowest cost of remittance of funds among EMs, other than Mexico.