NEW DELHI: India has topped the list of countries receiving remittances in 2023 according to the World Bank’s latest Migration and Development brief.
The United States remains the largest source of remittances and India is the top remittance recipient in 2023 at $125 billion, said the brief.
The countries that follow India are Mexico ($67 billion), China ($50 billion), the Philippines ($40 billion) and Egypt ($24 billion).
Interestingly, India has implemented savings programs to attract foreign currency deposits from non-resident citizens. Such deposits are usually repatriable, yield higher interest rates than comparable international interest rates (e.g., US treasuries or term deposits in a US bank) and are tax exempt. As of September 2023, non-resident Indian deposits in India amounted to $143 billion, registering an increase of over $10 billion in one year.
A special section of the brief describes how diaspora finances can be mobilized for development and strengthening a country’s debt position. Diaspora bonds can be structured to directly tap diaspora savings held in foreign destinations.
"Many countries provide for non-resident deposits to attract diaspora savings. However, unlike diaspora bonds, such savings tend to be short-term and volatile. Future inflows of remittances can be used as collateral to lower the costs of international borrowings by developing countries. Due to their large size relative to other sources of foreign exchange, counter-cyclical nature and indirect contribution to public finances, remittances can also help improve a country’s sovereign ratings and its ability to repay debt," said the brief.
Remittances to low and middle income countries (LMICs) grew at an estimated 3.8 per cent in 2023.
“Remittances are one of the few sources of private external finance that are expected to continue to grow in the coming decade. They must be leveraged for private capital mobilization to support development finance, especially via diaspora bonds,” said Dilip Ratha, lead economist and lead author of the report. "Remittance flows to developing countries have surpassed the sum of foreign direct investment and official development assistance in recent years and the gap is increasing," Ratha adds.
Because of their volume and countercyclical nature, remittances improve a country’s ability to repay external debt, in other words, the country’s creditworthiness. Like exports, remittances represent sizable foreign exchange earnings in many countries. Moreover, remittances tend to be stable and even countercyclical during economic downturns in the recipient country.