NRI Remittances: Uttar Pradesh, Bihar to take over Kerala? Here’s what latest trends suggest

It is a general perception that a large chunk of the NRI population hail from Kerala and the state receives most of the NRI remittance inflows in the country. However, this might change soon with an increase in the number of NRIs hailing from states like Uttar Pradesh, Bihar, Odisha and West Bengal, according to a report.

“Popular perception is that a major chunk of India’s NRI population hail from Kerala. This is partly true with Kerala being a traditional beneficiary of remittance inflows (10% of GSDP in 2017), but this is likely to change,” Axis Mutual Fund said in a research note on NRI Remittances.

The note cited a recent RBI study which said nearly 50% of emigration cleared by the Ministry of External Affairs in 2020 was from Northern states like Uttar Pradesh, Orissa, Bihar and West Bengal.

“This is reportedly due to narrowing of wage differentials between the Gulf and Southern states,” Axis AMC said.

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Remittances falling in Kerala, Karnataka

According to the report, the role of remittances in GSDP has been falling in states like Kerala (7.5% as of FY21) and Karnataka. In contrast, the remittances’ contribution to the state’s GDP is rising in Northern states.

“Significant rise in remittance % of GSDP in Maharashtra and Delhi could be support to families given severe Covid impact and the GSDP itself falling drastically during FY21,” the note said.

Another trend that was noticed by the RBI study was the rising prominence of North America in remittance inflows.

“The US is now the largest individual country source of remittances (23.4% of total) overtaking UAE at 18%. This is possibly driving shift in remittance share from public sector banks to private sector banks (53% market share) and foreign banks operating in India,” the note said.

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According to Axis AMC note, the current fall in Indian currency is an opportunity for NRIs with “banks stepping up campaigns to attract dollar assets with attractive interest rates.”