Remittances to India: India remains the world’s top recipient of remittances, with inward flows doubling from $55.6 billion in 2010-11 to $118.7 billion in 2023-24. Remittances play a crucial role in financing India’s merchandise trade deficit and cushioning the economy against external shocks. The recent trends indicate a shift in the source of remittances, signalling both opportunities and challenges for the Indian economy.
The Reserve Bank of India’s March 2025 Bulletin highlights a structural shift in India’s remittance landscape. For the first time, the share of remittances from advanced economies such as the United States, the United Kingdom, Canada, Australia, and Singapore has surpassed that from the Gulf Cooperation Council countries. This trend reflects a broader migration pattern where skilled Indian workers are increasingly moving to advanced economies for employment opportunities.
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The share of remittances from the United States increased to 27.7% in 2023-24 from 23.4% in 2020-21. Similarly, the United Kingdom’s share rose from 6.8% in 2020-21 to 10.8% in 2023-24. The UAE remained the second-largest source, with its share slightly increasing from 18% to 19.2% in the same period. While the Gulf region continues to host a significant number of Indian migrants, primarily in blue-collar jobs within construction, healthcare, and tourism sectors, the rise of skilled migration to advanced economies highlights India’s growing integration into the global knowledge economy.
State-wise distribution of remittances
The shift in remittance sources has had an impact on state-wise inflows. While Maharashtra remains the largest recipient state, its share declined from 35.2% in 2020-21 to 20.5% in 2023-24. Kerala, Tamil Nadu, Telangana, and Karnataka have seen a rise in remittance inflows, reflecting the migration patterns of their residents. Kerala’s share nearly doubled, rising to 19.7% in 2023-24 from about 10% in 2020-21.
Tamil Nadu, Telangana, and Karnataka have also emerged as key recipients, with shares of 10.4%, 8.1%, and 7.7% respectively. States like Maharashtra, Punjab, and Telangana, which send large numbers of students abroad, are also seeing higher remittance inflows, as many students choose to stay back in host countries for employment.
Remittances to India: Challenges to inward flow
Despite the growing inflow of remittances, several emerging challenges could impact their sustainability. One key concern is policy changes in host countries. Stricter visa and immigration policies in advanced economies, particularly in the US and UK, could limit the movement of Indian workers. Additionally, ongoing geopolitical uncertainties and shifting employment policies in Gulf countries may impact blue-collar job opportunities. Another challenge is the higher cost of sending remittances.
While digitalisation has helped reduce costs, they remain above the Sustainable Development Goal (SDG) target of 3% for transactions of $200. Currently, the cost of remitting $200 to India stands at around 4.9%. Traditional banking channels impose higher fees, whereas fintech companies offer competitive pricing, making digital transactions a preferred mode.
Economic slowdowns in key source countries also pose a threat. An economic downturn in the US or UK could affect employment conditions for Indian migrants, directly impacting remittance flows. Similarly, fluctuations in oil prices and economic reforms in Gulf economies may reduce remittance potential from the region. Additionally, technological disruptions and digitalisation bring both opportunities and risks. While the increasing use of digital remittance platforms has transformed the remittance market, regulatory challenges, cybersecurity concerns, and varying levels of financial literacy among migrants can pose barriers to seamless digital transactions.
Policy imperatives for India
To sustain and enhance remittance inflows, India needs a multi-pronged approach. Skill development and global employability must remain a top priority. As India’s working-age population is expected to rise until 2048, sustained investments in education, skill development, and reskilling programs are necessary to ensure competitiveness in global job markets.
Strengthening India’s financial infrastructure is also essential. Expanding digital public infrastructure, strengthening fintech partnerships, and reducing remittance costs through policy interventions can further boost inflows. Additionally, bilateral agreements with key host countries can facilitate easier movement of Indian professionals and workers, ensuring a steady flow of remittances. Another important step is the diversification of remittance sources. Encouraging Indian professionals to explore emerging labour markets beyond traditional destinations can help maintain the stability of remittance inflows.
India’s remittance scenario is undergoing a transformation, driven by a shift in migration trends and technological advancements. While the increasing share of skilled migrants in advanced economies presents a stable and high-value remittance inflow, challenges such as regulatory changes, high transfer costs, and global economic uncertainties remain. Policymakers must adopt a strategic approach to sustain remittance growth and leverage this vital financial inflow for long-term economic resilience.