UPSC CURRENT AFFAIRS – 06th April 2025

Home UPSC Current Affairs Shift in India’s Remittance Sources: From Gulf to Advanced Economies

Shift in India’s Remittance Sources: From Gulf to Advanced Economies

Why in News?

The RBI’s 2023–24 Remittances Survey, released in March 2025, reveals a major structural shift. Advanced Economies (AEs) like the U.S., U.K., Canada, Australia, and Singapore now account for over 50% of total remittances to India. This marks a decline in the relative share of remittances from Gulf Cooperation Council (GCC) countries, which had traditionally been the dominant source.

Key Findings of the RBI Remittances Survey (2023–24)

United States Emerges as Top Source
The United States has become the largest single source of remittances to India, overtaking traditional Gulf contributors. This is due to a growing Indian diaspora engaged in high-skilled and well-paying sectors such as IT, healthcare, and finance.
Declining Share of GCC Nations
The Gulf Cooperation Council (GCC) countries — including the UAE, Saudi Arabia, Kuwait, Qatar, and Oman — have witnessed a decline in their proportional contribution to India’s remittance inflows. While still significant, their dominance has diminished.
Migration Trends Reflect Structural Shift
The shift signals a transition in Indian migration patterns:
- From low-skilled, temporary migration to the Gulf
- To high-skilled, semi-permanent migration to Advanced Economies (AEs)
- Accompanied by higher earnings, longer stays, and greater financial transfers per migrant

Shift in Remittance Sources Signify

Changing Nature of Indian Migration

There is a marked rise in migration to Advanced Economies (AEs) such as the U.S., Canada, Australia, U.K., and Singapore, driven by:
- Demand for high-skilled professionals in sectors like IT, healthcare, finance, and academia.
- International students transitioning to permanent residency and employment through post-study work visas.
In contrast, low-skilled migration to the Gulf is declining due to:
- Localisation policies (e.g., Saudisation, Emiratisation), which prioritise native workers.
- Stagnant wages, job insecurity, and limited career mobility in traditional sectors like construction and domestic work.

Higher Value per Migrant

Migrants to AEs:
- Typically earn higher incomes, have better financial literacy, and access to formal banking.
- Tend to stay longer, often acquiring citizenship or permanent residency, which stabilises and increases remittance flows over time.

Shift in the Purpose and Nature of Remittances

From AEs:
- Remittances are often planned financial transfers, aimed at education, investment, savings, and even philanthropic causes.
From the Gulf:
- Funds are largely used for family sustenance, daily living expenses, and repayment of migration costs.

This shift signifies India’s transition towards a knowledge-intensive diaspora economy, where quality of migration and integration in host economies matter more than volume.

Challenges Arising from the Shift

Volatility and Economic Sensitivity
- Remittances from AEs are more sensitive to global economic downturns, layoffs, and immigration policies.
- Example: U.S. tech layoffs may directly impact Indian remittance inflows.
Erosion of Traditional Gulf Support Base
- As low-skilled migration opportunities shrink, India may face employment pressures in remittance-dependent states like Kerala, Tamil Nadu, Andhra Pradesh.
Need for Migration Policy Realignment
- India must shift focus from volume-driven to value-driven migration, aligning with skill demands of AEs.

Way Forward: Policy Recommendations

Skill Harmonisation and Certification
- Develop globally recognised skill standards.
- Collaborate with AEs to align training with sectoral labour shortages (e.g., healthcare, construction, digital services).
Migration Mobility Agreements
- Bilateral agreements with countries like the U.K., Germany, Japan, Australia for legal and safe migration pathways.
- Boost student-to-worker pipelines and long-term visa categories.
Support Systems for Migrants
- Strengthen Indian missions abroad, grievance redressal, and diaspora outreach, especially in new destination countries.
Diversify Remittance Geography
- Expand migration corridors to Europe, East Asia, Africa, reducing dependence on a few countries.