Rising remittances a healthy signal

India has done it again. The country of over billion people topped in overseas remittances in 2018.

As per World Bank report, India received a whopping $79 billion (Rs 5.47 lakh crore) last year, a healthy upswing of 14 per cent from $65.7 billion (Rs 4.55 lakh crore) in 2017.

That means inflows increased by more than Rs 92,000 crore in last calendar year. The overseas remittances reached $62.7 billion (Rs 4.34 lakh crore) in 2016. That shows the inflows were more than $50 billion each year in the last couple of years during which period the country topped the global list.

Further, India outpaced China which occupied second place in the list with inflows of $67 billion (Rs 4.64 lakh crore) in 2018. This is the second instance where India has beaten China, the world's second largest economy after the US.

India outsmarted the Communist country and emerged as the world's fastest growing major economy.

It bagged the coveted tag in the last two financial years. Going by the projections and macroeconomic indicators, the country is expected to repeat the feat in next two financial years. Previously, China enjoyed the leadership position in economic growth.

Nevertheless, India and Indians should thank growing Indian diaspora for ever-increasing forex inflows. Better economic growth in the United States and rise in oil prices also pushed up remittances to India.

Oil-rich Gulf Co-operation Council (GCC) countries comprising Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE account for largest number of Indian expatriates who regularly send funds to their families back home.

Therefore, any rise in oil prices will have a positive impact on outward remittances from these countries to India.

The other factor that encouraged Indian expatriates to send more funds to their families was rupee depreciation last year. The currency lost its value by 509 paise or 9.23 per cent against the US dollar in 2018.

It ended last year at Rs 69.77 a dollar against the closing level of Rs 63.87 in 2017. In addition, it also notched up several dubious records on the valuation front.

It breached Rs 70 level vis-à-vis dollar. The currency also hit a historic low of Rs 74.45 against the US currency on October 11, 2018, thus becoming one of the Asia's worst performing currencies.

Any depreciation in currency spurs Indians living abroad to send more funds to their home country as they get more Indian rupees for same amount of dollars. The rupee's record depreciation last year is also one of the main factors for the steep rise in remittances.

But there is a downside to the currency depreciation even though it benefits Indian diaspora, thus spurring foreign inflows. Imports turn costlier and purchasing power of people living in India comes down as prices of commodities and products are linked to global markets.

The other key factor is that more and more talented Indians go abroad as salaries are very less in the country compared to developed and many developing countries.

That will have an adverse impact on the country and its economy in long run. Nonetheless, rise in remittances is a healthy sign in short term