Remittances from the Gulf countries have seen a marginal dip of around 4–5% in recent weeks as geopolitical tensions in West Asia prompt caution among migrant workers, forex intermediaries said. However, banks have denied any structural slowdown in inflows so far.
Industry participants said the moderation is largely visible in remittances from the Gulf Cooperation Council (GCC) countries, which account for a significant share of India’s inward remittance flows. According to a recent report by IDFC First Bank, majority of India’s remittances come from the US (27.7% of gross inflows), followed by the UAE (19.2%), the UK (10.8%), Saudi Arabia (6.7%) and Singapore (6.6%).
From the UAE, blue-collar migrant workers in sectors such as construction and services account for a large part of remittances. “Remittances from the Gulf countries have declined by around 4–5% since the conflict has begun,” said Pundri Kaksha, forex head at Alankit, adding that uncertainty linked to the war has made migrant workers cautious about transferring money.
What do Forex operators say?
Forex operators has noted a shift in the remittance behaviour, with fewer transactions being executed but at higher ticket sizes. Kaksha said the number of remittance transactions has declined even as the average value per transaction has increased, indicating that workers are sending money less frequently but in larger amounts.
Factors such as Ramadan are also influencing flows this year. Typically, many migrant workers travel to India during the period and bring cash or gifts for families. With travel becoming costlier and uncertain, some of them are sending money through remittance channels.
“At times like this, people would usually travel home and bring money with them. But if travel plans get disrupted, they send the money through remittance channels, which offsets the dip to some extent,” Pavan Kavad, managing director of Prithvi Exchange, said.
Inward remittances remain broadly stable
While inward remittances remain broadly stable for now, the outward forex market has seen a sharper impact, particularly in currency purchases for overseas travel. Kavad said the demand for foreign currency from Indian travellers has declined by around 20% as geopolitical tensions dampen the sentiment. Travel to the Gulf has almost come to a halt. People are even hesitant to visit the West.
Banks, however, said remittance inflows remain resilient. “At present, there is no structural decline in remittances. Historically, geopolitical tensions in West Asia do not immediately translate into a sharp fall in inflows,” said Biji SS, senior general manager and head – branch banking at South Indian Bank.
She said remittances are largely used for family maintenance and savings, making them relatively stable even during periods of uncertainty. Continued demand for labour is also expected to support flows. The recent depreciation of the rupee could provide some support to remittance inflows. Non-resident Indians often take advantage of favourable exchange rates to send money home when the rupee weakens, as it increases the value received by families back home.
Industry participants said the situation remains fluid and the impact on remittances could become more visible if the conflict lingers and begins to affect employment conditions in Gulf economies.