India retained the tag of the world’s largest destination for remittances with a bounty of $70.4 billion in 2014, but appreciation of the rupee stunted its growth, World Bank said on Tuesday. Remittance flows to India, which are more stable than other capital flows, are equivalent to 20% of foreign exchange reserves ($341 billion in FY15) and 2.5 times the FDI flows ($29 billion) to the country in 2014. “With new thinking these mega flows can be leveraged to finance development and infrastructure projects,” said Kaushik Basu, World Bank chief economist.
In 2014, the growth in remittances to India remained subdued at 0.6% compared to 1.7% in 2013, perhaps in part because appreciation of the rupee discouraged investment-related inflows, according to the World Bank’s migration and development brief. The availability of a simplified portfolio investment regime for the diaspora (since late 2013) may be diverting investment-oriented remittances towards higher returns offered by Indian stock markets, the World Bank report said. On the other hand, the fall in oil prices does not appear to have reduced remittances from Gulf countries, especially to India and other South Asian countries.