India Dispatch: India is expected to receive $70 billion in remittances this year, boosted by the weak rupee and Gulf workers sending more money home.
India set for record cash inflow as weak rupee boosts remittances
India is expected to receive a record US$70 billion (Dh257.11bn) in remittances this year, helped by workers in the GCC sending more money home and a weak rupee.
Total remittance flows to developing countries are set to rise 6.5 per cent over last year to reach $406bn, with India the largest recipient of remittances, according to a report by the World Bank.
The country received $64bn last year, up from $54bn in 2010. More than a quarter of India's total remittances are from the GCC, said the Reserve Bank of India, the central bank.
"Remittance flows are continuing to grow strongly to South Asia, the Middle East and North Africa, and East Asia and Pacific regions, with large numbers of workers in the Gulf Cooperation Council countries, where high oil prices are driving vigorous economic activity," said the World Bank.
The rupee has weakened by about 25 per cent against the US dollar since August last year, hitting an all-time low in June and touching a 10-week low following a batch of economic data last week that stirred up concerns about India's slowing economic growth.
Worries surrounding Europe's economies have also boosted the dollar.
The UAE's currency is pegged to the dollar, which means workers in the Emirates can buy more rupees with each dirham they earn.
"Exchange rate is a major factor that determines trends in remittance flows," said the World Bank. "An unexpected depreciation of the home currency can spur a surge in remittance flows."
Money-exchange companies have reported that flows from the UAE to India have surged up to 20 per cent at times this year, largely driven by weakness in the rupee.
"We have seen a spurt in the volume of remittances by about 10 per cent, especially with the expatriates taking advantage of depreciating rupee value in the past few days," said Adeeb Ahamed, the chief executive of Lulu International Exchange.
"Mirroring the trend, I foresee the situation is only going to improve in the near future."
Hans Timmer, the director of the World Bank's Development Prospects Group, said: "Although migrant workers are, to a large extent, adversely affected by the slow growth in the global economy, remittance volumes have remained remarkably resilient, providing a vital lifeline to not only poor families but a steady and reliable source of foreign currency in many poor remittances recipient countries."
Remittances to South Asia this year are expected to total $109bn, up 12.5 per cent on last year. East Asia and the Pacific region is estimated to receive $114bn, showing a growth of 7.2 per cent.
The Middle East and North Africa is set to receive $47bn, up 8.4 per cent over last year, according to the report.
"Remittances to developing countries are projected to grow by 7.9 per cent in 2013, 10.1 per cent in 2014 and 10.7 per cent in 2015 to reach $534bn in 2015," it stated.
"Worldwide remittances, including those to high-income countries, are expected to total $534bn in 2012, and projected to grow to $685bn in 2015."