New Delhi: Notwithstanding a significant 8.9% drop in remittances to India in 2016, the country retained the top spot among remittances receiving nations, according to a World Bank report.
The World Bank, in its latest report, said that the remittances to developing countries fell for a second consecutive year in 2016, a trend not seen in three decades.
This was attributable mainly to the drop in oil prices and fiscal tightening in the oil producing countries in the Middle East, which has a significant Indian migrant population accounting for a large chunk of remittances.
India, while retaining its top spot as the world’s largest remittance recipient, led the decline with remittance inflows amounting to $62.7 billion last year, a decrease of 8.9% over $68.9 billion in 2015.
In the latest edition of the Migration and Development Brief, the Bank estimates that officially recorded remittances to developing countries amounted to $429 billion in 2016, a decline of 2.4% over $440 billion in 2015.
Global remittances, which include flows to high-income countries, contracted by 1.2% to $575 billion in 2016, from $582 billion in 2015.
Low oil prices and weak economic growth in the Gulf Cooperation Council (GCC) countries and the Russian Federation are taking a toll on remittance flows to South Asia and Central Asia, while weak growth in Europe has reduced flows to North Africa and Sub-Saharan Africa, it said.
The decline in remittances, when valued in US dollars, was made worse by a weaker euro, British pound and Russian ruble against the US dollar.
As a result, many large remittance-receiving countries saw sharp declines in remittance flows.
India was the largest remittance recipient followed closely by China ($61 billion), the Philippines ($29.9 billion), Mexico (28.5 billion) and Pakistan (19.8 billion), making up the top five.
As a share of the gross domestic product (GDP), however, the top five recipients were Kyrgyz Republic, Nepal, Liberia, Haiti, and Tonga.
According to the report, remittance to the South Asian region declined by 6.4% in 2016 in the face of lower oil prices and fiscal tightening in the GCC countries.
“Nationalisation” policies aimed at lowering the unemployment rate of nationals have slowed employment of foreign workers, impacting remittance flows to South Asia, the report said.
“Remittances to India declined by 8.9% in 2016, to $62.7 billion. In Bangladesh, remittances declined by an estimated 11.1% in 2016,” the report said, adding that in Pakistan, the 12% growth witnessed in 2015 moderated to an estimated 2.8% in 2016.
Nepal experienced unusually high growth in remittances, at 14.3% in 2015, due to migrants sending financial assistance home after the earthquake.
In 2016, remittance flows to Nepal declined by an estimated 6.7% from the previous year’s high level.
In Sri Lanka, remittance growth was estimated at 3.9% in 2016, the report said.
Remittances accounted for 2.9% of India’s GDP in 2016.
It was highest for Nepal with 29.7% of the GDP, followed by Sri Lanka (8.8%), Pakistan (6.9%), and Bangladesh (6%).
While for India, remittances were not large as a proportion of the GDP, however, there were subnational variations in the impact of remittances.
For Kerala, remittances were estimated at 36.3% of the net state domestic product and contributed significantly to household consumption, the report said.
The World Bank said moving forward, remittance growth in South Asia is projected to remain muted, because of low growth and fiscal consolidation in GCC countries.
“An increase of only 2.0% is expected in 2017. Bangladesh’s remittance growth in 2017 is forecast at 2.4%, India’s at 1.9%, Pakistan’s at 1.4%, and Sri Lanka’s at 1.3%,” it said.
According to the World Bank, the economic slowdown in Saudi Arabia and Kuwait has adversely impacted Indian migrant workers in those countries.