NRIs send more money back home in 2011

At a time when India is worried about the rupee's depreciation, it can take heart from the increase in remittances from NRIs. Latest World Bank estimates suggest that India could end 2011 as the top recipient of remittances.

Money sent by NRIs is likely to be at $58 billion in 2011, slightly ahead of China's estimated receipts of $57 billion, says the World Bank. With this, India would beat China in receiving highest remittances globally, for five years in a row from 2007.

Countries such as Mexico and the Philippines were among the other top recipients of remittances from their respective emigrants. According to RBI data, money sent by NRIs abroad increased 13.3 per cent (to $45.6 billion) for the first nine months of 2011 compared with the first nine months of 2010. Inflows expanded 7.9 per cent for a similar period in 2010 over 2009. Remittances in 2010 accounted for 3 per cent of India's GDP.

These remittances, also called personal transfers, do not include NRI deposits in banks here. Instead, these transfers are used for consumption by the NRIs' families invested in avenues like property. They contribute to the local economy.

Inflow from GCC region

Indians living in the Gulf Co-operation Council region, including UAE, Saudi Arabia, Oman and Bahrain, may be contributing the most in terms of remittances.

While there is no recent data available on India, the World Bank's Migration and Development Brief states that South Asia, of which India forms a key nation, received 53 per cent of its remittances from the GCC states in 2010.

The US accounted for 18 per cent of the inflows while 12 per cent came from Western Europe. Given that much of the migrant workers who go to countries such as the UAE traditionally leave behind their families in India and send them money for domestic expenses, the above data may be true of India as well.

Rupee depreciation

Remittances from NRIs saw a sharp pick up in the September quarter over the previous three-month period. As against the 3-4 per cent quarterly growth in remittances in 2010 and the first half of 2011, remittances in the September quarter jumped 9.8 per cent over the previous quarter.

The rupee's depreciation against many other currencies could be one reason for the higher remittances. Currencies such as the US dollar, Bahraini dinar or the Saudi riyal, for instance, all appreciated sharply against the rupee in the last six months. That means these foreign currencies will have higher purchasing power in India as each unit yields more rupees, thus triggering NRIs to send home more money to ‘lock into' their home currency.

High inflation too, could have triggered NRIs to send more to their families to meet the price rise on their food bill and higher interest on domestic loans. The WPI headline inflation peaked in September.

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