World Bank Report On Remittances

In News

Recently, the World Bank released a report on remittances.

Major Findings of the Report

Indian scenario
- India received over $83 billion in remittances in 2020, a drop of just 0.2% from the previous year, despite a pandemic that devastated the world economy.
  - In 2019, India had received $83.3 billion in remittances.
- Remittances declined due to a 17% drop in remittances from the United Arab Emirates.
Neighbouring Countries Performance
- In neighbouring Pakistan, remittances rose by about 17%, with the biggest growth coming from Saudi Arabia.
- In Bangladesh, remittances also showed a brisk uptick in 2020 (18.4%), and Sri Lanka witnessed remittance growth of 5.8%.
- In contrast, remittances to Nepal fell by about 2%, reflecting a 17% decline in the first quarter of 2020.
Global Scenario
- China received $59.5 billion in remittances in 2020 against $68.3 billion the previous year, is a distant second in terms of global remittances for the year gone by
- India and China are followed by Mexico ($42.8 billion), the Philippines ($34.9 billion), Egypt ($29.6 billion), Pakistan ($26 billion), France ($24.4 billion) and Bangladesh ($21 billion).
- Remittance outflow was the maximum from the United States ($68 billion), followed by UAE ($43 billion), Saudi Arabia ($34.5 billion), Switzerland ($27.9 billion), Germany ($22 billion), and China ($18 billion).

Suggestions
- Growing significance of remittances as a source of external financing for low- and middle-income countries, there is a need for better collection of data on remittances, in terms of frequency, and timely reporting.
- Supportive policy responses, together with national social protection systems, should continue to be inclusive of all communities, including migrants.
- The World Bank is assisting member states in monitoring the flow of remittances through various channels, the costs and convenience of sending money, and regulations to protect financial integrity that affect remittance flows.
  - It is working with the G20 countries and the global community to reduce remittance costs and improve financial inclusion for the poor.

What is meant by Remittances?

It refers to money that is sent or transferred to another party, usually overseas.
They are funds transferred from migrants to their home country.
They can be sent via a wire transfer, electronic payment system, mail, draft, or cheque.
They can be used for any type of payment including invoices for business purposes or other obligations like personal transfers made to family and friends.
They represent one of the largest sources of income for people in low-income and developing nations, often exceeding the amount of direct investment and official development assistance.

Remittances to India

Under the Foreign Exchange Management Act (FEMA) of 1999, Non-Resident Indians (NRIs) and Persons of Indian Origin (PIOs) can open and maintain three types of accounts namely,
- Non-Resident Ordinary Rupee Account (NRO Account)
- Non-Resident (External) Rupee Account (NRE Account)
- Foreign Currency Non Resident (Bank) Account – FCNR (B) Account.
UAE, US and Saudi Arabia are the top three countries that have seen a growing amount of remittances being sent to India.

Significance of remittances

Money sent home by migrants is one of the largest financial inflows to developing countries.
Workers’ remittances are a significant part of international capital flows, especially with regard to labour-exporting countries.
Remittances can provide the receiving countries with much-needed foreign exchange.
Remittances are a more stable and reliable form of foreign earnings in many developing countries in comparison to FDI or international aid.
It helps in alleviating the Balance-Of-Payments (BOP) and the debt crisis of such countries.
Remittances are a stabilising factor for national currencies of developing countries

Remittances are helping to meet families’ increased need for livelihood support
As COVID-19 still devastates families around the world, remittances continue to provide a critical lifeline for the poor and vulnerable.

About World Bank

It traces its origin to the Bretton Woods Conference, officially known as the United Nations Monetary and Financial Conference, was a gathering of delegates from 44 nations that met from July 1 to 22, 1944 in Bretton Woods, New Hampshire (USA), to agree upon a series of new rules for international financial and monetary order after the conclusion of World War II.
The two major accomplishments of the conference were the creation of the International Bank for Reconstruction and Development (IBRD) and the International Monetary Fund (IMF).
The World Bank Group is an international partnership comprising 189 countries and five constituent institutions that works towards eradicating poverty and creating prosperity.
The five development institutions under the World Bank Group are:
- International Bank for Reconstruction and Development (IBRD)
- International Development Association (IDA)
- International Finance Corporation (IFC)
- Multilateral Guarantee Agency (MIGA)
- International Centre for the Settlement of Investment Disputes (ICSID)