MUMBAI: The significant changes in the migration and visa policy of the US, which is the largest source of remittances and the largest market for our software companies, are expected to have a limited impact to around $4.5 billion this fiscal, says a report.
Since FY21, the US has been the largest source of remittances for the country, with a share of 27.7% in FY24, up from 23.4% in FY21. Till then the UAE with a share of 26.9% was the top source.
The steep increase in the new H1B visa fee to $1,00,000 and remittance tax have amplified uncertainty and could increase the current account deficit by 0.1% of GDP in a pessimistic scenario. Net remittances are projected to grow 8% to $134.6 billion in FY26 in the base scenario and this can cumulatively lead to a hit of under $4.5 billion this fiscal, Paras Jasrai, an associate director & economist at India Ratings said Friday.
Under the base scenario 30% decline in visa issuance, net remittances would be hit by roughly $2.8 billion in FY26, or 0.07% of GDP. But if there is a sharper drop of 50% in visa issuances, then net remittances would be lower by $4.5 billion in FY26. On the other hand, if the decline in visa issuances is milder, net remittances would be lower by $2 billion this fiscal, he said.
However, he warned that any sharp fall in H1B visa issuances poses downside risks, potentially reducing the net remittances growth to 6.7% in FY26 and net remittances growth could slow down to around 5% in FY27, which is just half the annual growth rate during FY20-25.
Net remittances to the country, which is net of outflows, surged to $124.6 billion in FY25, more than doubling from $66.3 billion in FY15. India has been the top recipient of remittances since 2008, according to the World Bank. As a percentage of GDP, remittances touched a decadal high of 3.18% in FY25 up from the previous peak of 3.25% in FY15. After remaining below 3% of GDP during FY1722, remittances increased again due to the resilient and strong growth in the global economy, he said.
Remittances have been a stable source of financing external balances, especially amid volatile foreign direct investments. They financed roughly 48.2% of the country’s good trade deficit during FY20-25 up from 44.6% during FY14-19. In fact, during the current account deficit crisis of FY12-13, due to high oil prices, net remittances covered only about a third of the goods trade deficit.
The share of foreign-born workers in the US labour force has increased to 19.2% in 2024 from 18.6% in 2023.
The US has increased the H1-B visa fee to $1,00,000 from $2,000-5,000. The H1B visas issued by the US were flat at 1,80,000 during FY16-19 before dropping to a multi-decadal low of 61,569 in FY21. However, this started to improve thereafter, touching a record high in FY23. India’s share in the H1B visa issuances fluctuated in the range of 37.2-56% in the first decade of this millennium. Since then, it has been on a steady rise touching an average of 77.2% during FY20-23, however declined to a decadal low of 68.6% in FY24 indicative of early signals of shift in H1B visa issuances from various companies.
