Examining the RBI’s remittances survey

Remittances have long played a quiet but crucial role in India’s external sector balance, but in terms of policy attention, they have often been overshadowed by indicators such as foreign direct investment (FDI) and trade flows. Yet the latest data from the Reserve Bank of India (RBI)’s Sixth Round of India’s Remittances Survey, released in March, makes it clear that such flows are integral to the stability and structure of India’s external accounts. Inward remittances stood at a record $118.7 billion in 2023-24, not only exceeding FDI inflows but also financing over half of India’s merchandise trade deficit. India’s persistently high remittance flows constitute a vital stabilising force in the context of global economic uncertainty and tightening financial conditions.

Structural shifts

However, the data also point to deeper structural shifts that merit closer attention. The most striking is the changing spatial composition of remittance sources. The traditional dominance of countries of the Gulf Cooperation Council (GCC) is now giving way to advanced economies (AEs). The U.S. accounts for 27.7% of India’s inward remittances, up from 23.4% reported in the Fifth Round (2020-21) Survey. The U.S., U.K., Canada, Australia, and Singapore together account for 51.2% of the flows, overtaking the cumulative share of the six GCC nations (37.9%) by a large margin. This inversion of a historical pattern reflects not only macroeconomic shifts but also a change in the profile of Indian migrants — from predominantly low-skilled workers in West Asia to high-skilled professionals and students in AEs.

This has long-term implications for both the volume and stability of remittance inflows. Migrants in AEs tend to have higher and more stable earnings, and their remittance behaviour is often less sensitive to cyclical volatility in commodity markets. At the same time, unlike temporary workers in the Gulf, high-skilled emigrants in AEs may remit less as their economic and familial integration abroad deepens.

One concern is the growing concentration of large-value transactions. In 2023-24, transfers above ₹5 lakh accounted for nearly 29% of total remittance value, even though they represented a small fraction (1.4%) of overall transactions. This skew suggests that remittances are increasingly driven by higher-earning, professionally mobile Indians rather than broad-based migrant remitters. While this may reflect the upward mobility of the diaspora, it also creates potential vulnerabilities. A slowdown in high-skilled migration due to adverse host-country immigration policy shifts could affect these large inflows disproportionately.

There is also an accelerating shift toward digital modes of remittance. In 2023-24, digital channels, on average, accounted for 73.5% of all remittance transactions. Transaction costs have correspondingly declined. The average cost of sending $200 to India now stands at 4.9%, below the global average of 6.65%, though still above the Sustainable Development Goal benchmark of 3%. This progress is impressive and attributable to the rise of fintech platforms and app-based money transfer services.

Despite this aggregate progress, the transition to digital channels has not been uniform across remittance corridors. While migrants in countries such as the UAE (76.1%) and Saudi Arabia (92.7%) have recorded a very high share of remittance transfers via digital channels, others such as those in Canada(40%), Germany (55.1%), and Italy (35%) continue to depend more heavily on conventional methods. These disparities suggest that the infrastructure and regulatory environment remain a binding constraint. For India, the policy challenge lies in deepening cross-border digital payment linkages. Doing so will not only lower costs and increase efficiency but also ensure that remittance flows remain within formal, trackable financial channels.

At the sub-national level, the remittance map shows persistent asymmetries. Bihar, Uttar Pradesh, and Rajasthan received a total share of under 6% of remittances, while Maharashtra, Kerala, and Tamil Nadu received about 51%. This is not merely a reflection of historical out-migration patterns but of unequal access to migration-enabling infrastructure: foreign language training, credentialing pathways, and employer linkages remain thin. National skilling missions must become far more State-responsive; else, India risks perpetuating remittance elite-regions and households with the social capital to migrate and the financial literacy to leverage returns, while leaving the rest behind.

Missing data

Notably, this round does not provide data on how remittances are used at the household level. This limits a fuller understanding of the developmental role of remittances beyond their macroeconomic contribution to the balance of payments. As the profile of migrants shifts towards higher-skilled occupations and as transaction sizes become more concentrated at the upper end, it is crucial to assess whether these flows are being directed towards longer-term financial goals such as savings, investment, or asset creation or continue to be primarily consumption-smoothing in nature. Incorporating this dimension would also help inform the design of complementary instruments — savings-linked remittance products, targeted financial literacy programmes, or investment incentives for remittance-receiving households — that can enhance the long-run developmental multiplier of these inflows.

Amarendu Nandy, Assistant Professor (Economics Area) at the Indian Institute of Management Ranchi. Views are personal