India suffers steep decline in remittances from GCC nations
MUMBAI // Flows of remittances to India from the Arabian Gulf region declined in the year to the end of March as the slump in oil prices took their toll, a report released yesterday revealed.
“Falling oil prices have had a sweeping impact on the oil- producing economies of GCC, severely denting their oil revenue and spending by both governments and households,” according to the report by Crisil, the Mumbai ratings and research company that is part of S&P Global. “This has had a negative impact on remittances from the region.”
Remittances to India from the GCC declined by 2.2 per cent to US$35.9 billion in the 12 months to March, compared with the same period a year earlier. The GCC is India’s largest source of remittances because of the large number of Indian expats working in the region. Crisil said that “more than half” of remittance income in India is from the Gulf region.
Its figures show that the UAE is the biggest source of GCC remittances into India, accounting for 38.7 per cent, followed by Saudi Arabia with a 28.2 per cent share.
Crisil and the World Bank say that GCC remittances to India could fall further in future if oil prices stay low for an extended period, or suffer unexpected declines.
“The decline in oil prices and economic slowdown have been steady in the past one year,” said Adeeb Ahamed, the chief executive of Lulu International Exchange. “This has definitely had an effect on the remittance volume from the GCC to India.”
This is despite the Indian rupee trading at relatively low levels against the US dollar, which means that Indian expats in the region could receive a favourable exchange rate for their earnings.
India is the largest recipient of remittances worldwide. According to the World Bank, total remittances to India last year fell to $69bn from $70bn in 2014.
The sharp drop in oil prices also led to a decline in exports from India to the Gulf region, with goods exports falling by 18.7 per cent last year compared with the year earlier, according to Crisil. A quarter of Indian exports to the region are petroleum products. “While falling oil prices have curbed India’s exports to the GCC, imports from the GCC have also fallen steeply,” Crisil said.
Imports from the GCC were down by 34.5 per cent in the year to the end of March.
“This has helped alleviate some stress from lower remittance and export income,” according to Crisil. “In fact, India’s trade deficit with the GCC has fallen by $46bn, or 77 per cent in three years, to $14bn because of rapidly declining imports.”
Mr Ahamed said that the outlook for remittances from the GCC was fairly promising.
“Infrastructure development works are steadily picking up pace across all GCC countries and this in turn will create demand for professional and skilled workers from the subcontinent,” he said. “Therefore, remittances are expected to continue to grow, albeit at a slower pace.”
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Updated: May 22, 2016 04:00 AM