Even as developing countries as a whole will witness a slowing of remittances in 2015, India, the world’s largest recipient of such inflows, would somewhat weather the trend, the World Bank has said, reports fe Bureau in New Delhi. On the back of the recovery of the US economy and the “fiscally supported economic resilience” in the Gulf countries, remittances to India will grow 2.5% this year compared with a 2% increase in such flows to all developing countries, according to the World Bank’s latest Migration and Development Brief released on Friday.
That would mean remittances to India would touch $72 billion in 2015, maintaining its lead over China, which will receive about $64 billion, marginally lower than the previous year.
In 2014, overall remittances to developing countries grew 3.3% while those to India increased just 0.6%.
Global remittances, sent home from some 250 million migrants, are projected to grow by 1.3% to $588 billion in 2015, compared with a growth of 3.6% in 2014. The decline in growth in world remittances is primarily due to a weak Europe, especially Russia, and the fall of currencies against the US dollar and lower oil prices.
Slowing remittances this year will affect most developing regions, in particular Europe and Central Asia, where flows are expected to decline by 18.3% in 2015.
Remittances by the Indian diaspora have been a stable source of foreign exchange for India and helped the country rein in its current account deficit. While other capital flows have been relatively unsteady, remittances have stood in excess of $16 billion over the last nine quarters. Remittance flows were a fifth of the country’s foreign exchange reserves of $341 billion in FY15 and 2.5 times the FDI flows to the country in 2014.
Looking to 2016, the report says remittances to developing countries are expected to rise by about 4%, reaching $453 billion, buoyed by the continuing recovery in the US and a modest acceleration of economic activity in Europe. Global flows of remittances are expected to recover in 2016 to reach $610 billion, and then to $635 billion in 2017.
The World Bank hoped that India’s new payments banks will expand penetration of the banking sector in rural areas, thus increasing competition in the remittances market to bring down the cost of services.
Among South Asian countries, reliant on remittances in a big way, Pakistan would continue to witness strong growth in remittances (a 17.8% increase in 2015 against 16.7% in 2014). A jump in remittances to Nepal is projected for 2015, in response to the earthquake (growth projected at 14.3% in 2015 versus 5.2% in 2014).
Remittances to developing countries are expected to reach $435 billion in 2015, registering a modest growth rate of 2% from last year. This represents a significant slowing in the growth of remittances from the rise of 3.3% in 2014 and of 7.1% per year from 2010 -13.
Global remittances are expected to recover in 2016 to reach $610 billion, and then $635 billion in 2017.