While the economy of India has been on a standstill because of Covid-19, the one thing that has affected the situation the worse is the lack of NRI remittances. Major economies are on the verge of recession this year, contributing to lesser transactions made by the NRIs in India. They are also likely to send less money to India.
NRI remittances cover one of the maximum part of financing India’s current account deficit. The reduced oil prices is going to ensure better impacts on the import bill and keep it within the comfort zone, thus putting reduced impacts on the current account deficit in the country.
“In India, remittances are projected to fall by about 23 percent in 2020, to $64 billion – a striking contrast with the growth of 5.5 percent and receipts of $83 billion seen in 2019,” the World Bank reported in a report conducted on the impacts of remittances. The report was released on April 22.
Some of the foreign countries that contribute to India’s remittances include UAE, the US, Saudi Arabia, Qatar, Kuwait, Oman, United Kingdom and Malaysia. They account for almost 80% of the remittances.
Out of them all, UAE, which hosts over 3.3 million expatriates, is the largest source of remittances in India.
Over 50% of the remittances coming from the Middle East and the sudden fall in the price of crude oil, the countries around are likely going to witness lay-offs.
According to the reports, Kerala which has over 2.5 million migrants working in the gulf region is likely going to witness a 15% drop in the remittances. It receives over 1,00,000 crore in remittances and is going to be the worst hit state in the country.
Aside from Kerala, the next Indian state that is likely going to be the most affected is Punjab which receives over INR 1000 crore per month in remittances.
This sudden drop in the NRI remittances is likely going to hit the bank deposits. The drop is also going to hit the general family incomes and even inflict another blow to the economy.
While the outcome is inevitable, it is going to end up taking a toll on the country’s situation and the kind of economy that prevails following the Covid-19 lockdown.
