India to take a 23% hit on remittances: World Bank

The loss of employment and wages for migrant workers in Gulf countries will contribute significantly to the drop in remittances to India, it added.

Remittance flows into India may decline by 23% in 2020 to $64 billion, the sharpest fall in recent history, due to declining oil prices and the Covid-19-led global recession, said a World Bank report.

The loss of employment and wages for migrant workers in Gulf countries will contribute significantly to the drop in remittances to India, it added.

In 2019, India recorded a 5.5% growth in remittance receipts to $83 billion.

“Global remittances are projected to decline sharply by about 20% in 2020 due to the economic crisis induced by the Covid-19 pandemic and shutdown. The coronavirus-related global slowdown and travel restrictions will also affect migratory movements, and this is likely to keep remittances subdued even in 2021. The projected remittance growth of 5.8% in 2021 will keep total regional flows at about $115 billion,” the World Bank added.

Studies show that remittances alleviate poverty in lower- and middle-income countries, improve nutritional outcomes and are associated with higher spending on education, and reduced child labour in disadvantaged households. A fall in remittances affects the ability of families to spend on these areas, as more funds are allocated for food and immediate livelihood needs.

“Remittances are a vital source of income for developing countries. The ongoing recession caused by Covid-19 is taking a severe toll on the ability to send money home and makes it all the more vital that we shorten the time to recovery for advanced economies,” said World Bank group president David Malpass.

Madan Sabnavis, chief economist, Care Ratings, said the forecast is of concern. “The current account deficit (CAD) has been under control mainly due to remittance and software exports. Both of them will be impacted due to Covid-19, which will put pressure on CAD. However, with oil prices crashing, the trade balance will improve and provide some compensation. The balance of payments will definitely be under some pressure as capital flows would be restricted as countries go through a recession. The high quantum of reserves will help tide over this problem.”

In other South Asian countries, such as Pakistan, the projected decline in remittances is about 23% to $17 billion in 2020, while for Bangladesh it will fall by 22% to $14 billion. “Before the coronavirus crisis, migrant outflows from the (South Asian) region were robust. The number of recorded, primarily low-skilled emigrants from India and Pakistan rose in 2019 relative to the prior year, but is expected to decline in 2020 due to the pandemic and oil price declines impacting the GCC (Gulf Cooperation Council) countries. In India, the number of low-skilled emigrants seeking mandatory clearance for emigration rose slightly by 8% to 368,048 in 2019.”

The World Bank said the coronavirus crisis has affected both international and internal migration in the South Asia region. “The lockdown in India has impacted the livelihoods of a large proportion of the country’s nearly 40 million internal migrants. Around 50,000–60,000 moved from urban centres to rural areas of origin in the span of a few days,” it added.