MUMBAI: Amid a fragile truce in West Asia, Reserve Bank of India Governor Sanjay Malhotra has said the central bank does not expect any immediate disruption to remittance flows due to the Iran war, and indicated that post-war reconstruction demand could, in fact, support inflows.
“We are not anticipating a dent to remittances if the crisis is going to be resolved very soon,” Malhotra said when asked about the potential impact of the conflict. West Asia, led by the six GCC countries, remains the single largest source of remittances to India, accounting for close to 38% of the total of $135.5 billion in the last fiscal.
While uncertainty persists over the durability of the ceasefire, the central bank appears upbeat about near-term trends. Malhotra noted that remittance sources have diversified over time, reducing dependence on the Gulf region.
“Our remittances actually come from a rather diverse set of regions in which the share of the Gulf countries has declined over the years,” he said.
However, he cautioned that weaker global growth prospects could dampen external demand and, in turn, affect remittance flows.
Internal assessments by the central bank suggest that remittances have historically remained resilient during geopolitical shocks, typically showing short-term volatility rather than a structural decline.
Stable remittance inflows, which reached around $135.5 billion in FY25, continue to act as a critical stabiliser, helping offset trade deficits and keeping the current account deficit within sustainable limits.
Deputy Governor Poonam Gupta reinforced the outlook, stating that remittances are unlikely to be significantly affected by the ongoing conflict due to their diversified sources and long-term structural trends.
“On remittances, it comes from a rather diverse set of regions, the Gulf region’s share has come down over time, we have relatively low to medium skills people in the region who send these remittances and if we take the data of past 10-15 years it show that this moves only in one direction so we are not anticipating a dent to remittances from the Iran war,” Gupta said.
She added that inflows could receive a further boost going forward.
“We anticipate that the demand for migrant workers will in fact increase from the Gulf region for the post-war reconstruction, which will help the remittances, plus the currency gains should also add to more inflows,” she said.