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.