Flows of foreign earnings into India, which receives more remittances than any other country, are expected to continue to grow this year, boosted by a weak rupee.
"Indian remittances continue to be on the up," says Sudhesh Giriyan, the head of Xpress Money Business, a global money transfer company which offers its services across 40,000 points in India.
"This has been the trend for the past couple of years now and this year so far has been no different. As we speak, the Indian rupee is still at a very attractive level and even now sending Indian rupees is a very, very attractive proposition."
Most money comes from the Middle East, which accounts for about 31 per cent of remittances, he said. About 29 per cent are from North America and 20 per cent are from Europe. India is the largest recipient of remittances in the world, receiving US$69 billion last year, up from $63bn the previous year, according to data from the World Bank. Remittance flows are being boosted by infrastructure projects in the Arabian Gulf region, the World Bank says.
"In addition to large numbers of unskilled migrants working mainly in the GCC, India also has a large skilled diaspora sending money home, and as noted above, their prospects in major sending countries are improving," it said in a report published last month. Remittances are an important part of India's economy, accounting for 3 per cent of India's GDP, it added.
"The economic impact is substantial," says Promoth Manghat, the vice president of global operations at UAE Exchange. "Remittances have a multiplier effect."
He says in Kerala, in particular, the local economy is very much dependent of flows of cash from the Gulf. About half of the Indian residents in the UAE are estimated to be made up of Keralites.
"That money that is coming in is getting consumed in the country," said Mr Manghat. "Remittances into the country have an economic and social impact.
Remittances to India from the UAE in the first four months of this year have risen by about 6 to 8 per cent for UAE Exchange, Mr Manghat says.
"We expect the growth to be much faster in the second half of the year," he says, adding there are a number of festivals in the second half of the year including Eid, Diwali and Christmas, which are peak periods for remittances.
As well as the weak rupee, he cited an increase in the activity on infrastructure projects in the UAE as a factor in the growth.
"The Gulf continues to prosper. There are lot of new job opportunities getting created."
Last year, the Reserve Bank of India removed a cap on interest rates for NRIs, which allows them to get the same rates of interest on fixed deposit accounts as citizens in India. This means that NRIs [non resident Indians] can earn interest of up to about 9 per cent on deposits in India, compared to rates of about 4 per cent before. The rates in India are relatively high compared with other parts of the world.
