While exports of services receive considerable attention, the role and importance of private transfers or remittances to India are only occasionally emphasised. Yet, it has been known for some time now that India is among the highest remittance receiving countries in the world, and that at around 4 per cent of GDP, net private transfers contribute to reining in the current account deficit on India’s balance of payments.
In 2011-12, net private transfers to India consisting large of remittances from outmigrants, stood at $63.5 billion. This compares with net earnings from exports of software, business, financial and communication services of $58.1 billion and a relatively meagre net foreign investment inflow of $39.2 billion. Given this importance of remittances, knowledge of the region-wise and occupational category-wise distribution of the sources of remittances is of considerable significance for policy.
Traditionally it has been held that the Gulf countries and North America were the two dominant sources in terms of region, with Europe following as a distant third. In 2008-09 for example, the Reserve Bank of India has estimated, based on a survey of remittance-receiving households, that close to a third (30.8 per cent) of total foreign remittances came from the Gulf countries, 29.4 per cent from North America, and 19.5 per cent from Europe.
However, North America has been privileged for one reason. The impression that dominates analyses of the subject is that migrants to the US, Canada and Europe were predominantly skilled, with those to the first two countries being engaged largely in software and technology-related services. On the other hand, migrants to the Gulf countries are seen as being largely semi-skilled or unskilled and engaged in the petroleum, construction and services industries.
Earlier estimates of the region-wise sources of remittances had suggested that in the 1980s and 1990s, remittances from migrants to the Gulf dominated the total, but that a structural shift in favour of remittances from North America occurred towards the end of the 1990s. This geographical shift in the distribution of remittances by source was, therefore, seen to reflect a shift in the sources of remittances away from those in semi-skilled and unskilled occupations to those in high-skilled occupations, especially in the services arwea.
However, evidence from a survey conducted by the Reserve Bank of India (http://rbidocs.rbi.org.in/rdocs/PressRelease/PDFs/IEPR277SP0812.pdf) and posted recently on its website suggests that the picture may be more complex. The reference years for the survey were 2007-08 and 2008-09. As the accompanying chart indicates, according to that survey, the principal sources among the sample of migrants sending remittances to households in India included not only Software professionals, but also Entrepreneurs and those in partnerships, and Self-employed professionals. Thus, while more skilled migrants seem to be numerically more important in the sample of those making transfers, the occupations involved seem quite diverse. Software professionals dominate (26 per cent) but are by no means the majority.
Secondly, the distribution across countries of those whose occupation is identified as Software Professional diverges substantially from the traditional perception. If the survey is correct and representative, 16.7 per cent are in Dubai, 11.2 per cent in Sharjah and 10.4 per cent in Qatar, as compared with 16.4 per cent in USA, 11.2 per cent in UK and just 2.2 per cent in Canada. There could be many reasons for this evidence that goes contrary to the prevailing perception. One could be that the sample is biased. Another could be that while aggregate revenues earned from export of IT and IT-enabled services to North America dominates the total, there is a substantial amount of provision of software-related services on-site in the Gulf countries by companies that have a commercial presence there and employ Indian professionals.
Such evidence is not just a curiosity. Revenues from export of services through presence abroad need not be restricted only to companies. If individuals as short-term migrants earn incomes, a part of which is remitted to the home country, they are a source of income from abroad delivered in foreign exchange. These remittances can, therefore, be treated as another form of income from exports of services. This would imply that India’s revenues from export of services is more diversified than normally presumed and, therefore, perhaps more resilient. This gives one more reason why remittance receipts should be given more importance than they usually receive when compared with services exports or foreign capital inflows.
The article is really a nice one.....luv the arrangement and how it hits the nail on the head stating what remittances depicts.
Shadrach O.O.
Coordinating Editor,
PSD JOURNALS
www.projectsolutionsdomain.com
Another excellent counter-intuitive article from the author. It may be beyond the scope of the article to consider the social factors involved in the remittances, however there are few issues one would like to highlight. The sample has remittances sent by housewife, and one wonder how did the housewife earn enough to send money to India. The size of the housewife remittances is large enough to affect the results, however, in my opinion, it adds more strength to your conclusion, i.e that the remittances are more diversified than presumed.
I would also like to point out, that a emigrant working in America/Europe for few years is likely to settle whereas person working in Dubai may not. So the receipts are likely to be high from Dubai than America/Europe, as the savings are likely to be invested where they want to settle eventually.
Nice article. Just a suggestion on your graphics. The second pie with the break-up of remittances from software professionals is very cluttered. A Bar chart would have sufficed or in this case even a ranked table would have been easier to read.
It is pity that the government is looking NRI as money making tool only. Gulf scenario is very bad. Government authorities are giving a lot of troubles to NRIs especially to unskilled and semi skilled people. They are coming to India once a year or once in two years. If they want some document govt officials are trying their best to suck money. As soon as they land in the airport, customs people start looking like hunting dogs. No verification to manpower agencies, no verificatiion to salary issues etc etc. Other countries ( Srilanka,Indonesia,Philipines) are much better than India in dealing expats problems.
Why the author conveniently forgets to say about the state in India which gets the maximum remittance when he highlights from which country and which category of remitters the money comes. As all statistics from last 25 years or more confirms the majority of remittance are from NRKs (Non-resident Keralites) from Gulf including many industrialists who prosper here. When India was in dire state with no foreign exchange and had to sell gold to pay FE, it was remittance from Keralites abroad which saved India.
This is a one sided distorted statistics to pump up IT, nothing else!
While the remittances from abroad exceed the export of software, business,financial and communication, the remittances from abroad are not limited to the Indian citizens and migrant workers but also citizens of other countries, who are of Indian origin with families and relatives in India. The same is true regarding tourist income. Tourist income for India from citizens of other coutries who are of Indian origin with families and relatives in India form a big chunk of the total tourist income of the country. Yet India does not treat this catagory of non-citizens of India origin with any concessions or preferences. While the airlines offer senior citizens reduced fare for Indian citizens, there is no such reduced fare to non-citizens of India origin. India is the only country where the airlines, hotels and banks have different rates for citizens and non citizens, always ignoring the non-citizens of Indian origin who contribute heavily to Indian economyin essence
In other words, the so-called "brain drain" is contributing a whopping 4% to the GDP,
whereas the much larger pool of "brain at home" is unable to match this amount,
despite the fact that the remittances are only a small percent of what the emigrants
are earning. This would give the lie to all the talk of emigrants not contributing to
the nation and having just used our education system to further their own aims!
Yes, the study provides useful insights, especially on who is
remitting and what are their occupations among the Non Resident
(External) Rupee Account [NR(E)RA] holders. It is surprising to know
that health workers (doctors and nurses) category is not a part of the
top six remittance sending occupations, despite the fact that large
number of health workers also migrating to US, UK, Gulf, and rest of
the European countries.
It must be noted, however, that the study findings are limited to only
a part of remittance flows, i.e. from the NR(E)RA account holders. A
bulk of the remittances coming from the migrants in the Gulf does not
posses Non Resident Bank accounts.
It is fascinating to see that a housewife makes a contribution in sort of remittance. Very interesting finding. All along it has been considered that housewife's job is payless and thankless job. Probably i might have misunderstood the definition of housewife! What about the remittance that come from labour pool, especially from middle-east? Perhaps the body of the article and the title dont gel together as the article only tries to highlight the contributions of IT-sector.
Dear Sir,
I'm employed in the UAE for the last 14 years and have worked in all the three major emirates namely Abu Dhabi, Dubai and Sharjah with some of the industry majors. I have strong reservations about the data you have presented.
As an example it is a well-known fact that software industry is in rudimentary stage in UAE. As per your data 33.5% of Indian software professionals working abroad are in UAE. More over the profile of remittance too looks to be doubtful. Please recheck this data. I have chosen to write to you only because we value 'The Hindu' and its publications like Frontline as the most reliable and respected mass media publications from our country.
Thanks and regards
Bijo Mathew Philip
Good article, i don't think the figure mentioned are even not near to accurate. Also in the graph " distribtuion of software professional" mentioned Muscat and Oman, Oman is country and Muscat is capitla of Oman, Plese check and correct.
Thanks & regards
H.V.Moorthy
Dubai, Sharjah and Abudhabi are the states of United Arab Emirates(UAE)
not different country
And the government does not deem it fit to provide Indian Citizenship to people
who are primarily responsible for sustaining the Indian economy.....
The perception that migrants to Gulf countries are semi/un skilled
labourers may have been true in the 80's and 90's, but not so in this
decade. Now many Indians are owners of shops and malls in the Gulf.
Almost any large (chain) retailer in Kerala, has a shop or two in the
Gulf. The profile of migrants to the Gulf may have changed drastically
after the Gulf war.The high percentage of software professionals in the
Gulf is another indicator of the changed profile.
It could be argued that a majority of the people who claim to fall under
"Entrepreneurs/Partnership" or "Self-Employed" are really software professionals
who have moved on to founding their own business. It is a fact that many of Silicon
Valley's tech companies had Indians as co-founders. So >50% of remittances may be
coming from people employed in the IT space...
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