India's remittance growth to halve in 2024: World Bank

Remittances to India are forecasted to grow at 3.7% year-on-year to $124 billion in 2024, according to the World Bank. This compares with 7.5% growth in 2023 when remittance flows to India touched $120 billion. Remittances to India are expected to grow at 4% to reach $129 billion in 2025.

India’s efforts to link its Unified Payments Interface with source countries such as the United Arab Emirates and Singapore are expected to reduce costs and speed up remittances, says the World Bank.

The diversification of India’s migrant pool between a large share of highly skilled migrants employed mostly in high-income OECD markets and the less-skilled migrants employed in the GCC (Gulf Cooperation Council) markets is likely to lend stability to migrants’ remittances in the event of external shocks, the World Bank says in its Migration and Development Brief.

The top five recipient countries for remittances in 2023 were India, with an estimated inflow of $120 billion, followed by Mexico ($66 billion), China ($50 billion), the Philippines ($39 billion), and Pakistan ($27 billion).

The growth in India last year reflected the benefits of a deceleration in inflation and strong labour markets in the United States, the largest destination for India’s skilled migrants, and other OECD destinations as well as positive demand for skilled and less-skilled workers in the GCC countries which, together, are the second largest destination for Indian migrants.

Remittance flows to India from the United Arab Emirates, which account for 18% and are the second largest source of India’s remittances after the United States, benefited from the February 2023 agreement. The latter established a framework to promote the use of local currencies for cross-border transactions and cooperation for interlinking payment and messaging systems between India and the United Arab Emirates. The use of dirhams and rupees in cross-border transactions is instrumental in channeling more remittances through formal channels. In addition to the United Arab Emirates, Saudi Arabia, Kuwait, Oman, and Qatar account for 11% of India’s total remittances

Remittances to South Asia grew 5.2% in 2023 to reach $186 billion, tapering off from the more than 12% increase of 2022. The increase is attributable entirely to remittance flows to India, the World Bank says.

The key drivers of remittance growth in 2023 are a historically tight labor market in the United States, high employment growth in Europe, reflecting extensive leveraging of worker retention programs, and a dampening of inflation in high-income countries. The slackening in remittance growth relative to 2022 is attributable to a decrease in growth in 2023 in Saudi Arabia and Kuwait, and the halving of growth in the remaining GCC countries triggered by the drop in oil prices and production cuts in the OPEC+ countries.

 The sharp drop in remittance flows to Pakistan and a slowdown in Bangladesh in 2023 reflected the primacy of informal channels of money transfer triggered by exchange-rate-related challenges in the domestic economy, while the sharp rise in Sri Lanka reflected migrants’ renewed confidence in an ongoing economic recovery, the World Bank says.

South Asia’s three largest recipients—India, Pakistan, and Bangladesh, that collectively receive 91% of the total remittance flows to South Asia. The 2024 outlook for remittance growth in South Asia is 4.2%, driving remittances to $193 billion. By 2025, remittances are expected to reach over $200 billion.  Remittance flows to Pakistan are forecasted to recover and grow at about 7% to reach $28 billion in 2024 and increase at 4% to about $30 billion in 2025.