Indian overseas earnings pour in, but there is a red flag
The World Bank report also showed that Indian income earners withstood global headwinds far better than the rest of the developing world.
Indians working abroad account for the highest remittances to their home country. Mexico is a distant second.
The Reserve Bank (RBI) is likely to release the balance of payments data for FY2023 by the end of June, and it is widely expected that remittances made by Indian workers will not only cross the $100 billion mark but could even touch $110 billion. The projection to breach the $100 bn mark is based on the World Bank’s November 2022 ‘Migration and Development Brief’ which says for the first 9 months of the calendar year, Indians had repatriated $81.6 billion.
The World Bank report also showed that Indian income earners withstood global headwinds far better than the rest of the developing world. Compared to the 5% growth of worker remittances to low and middle-income countries for the first 9 months of 2022, remittances by Indians working abroad shot up 12%.
These remittances have played a crucial ‘balancing’ role in the economy. They have been a bulwark against the oil shocks of 1973, 1979 and 1990-91 by cushioning foreign exchange reserves and ensuring a debt servicing record free of default. During the pandemic, when exports sank to the bottom, they covered the growing deficit. Workers’ remittances are the largest constituent of current receipts after merchandise exports, and finance more than 15% of current payments since 2001.
The World Bank rightly notes that these remittances are vital to maintaining and improving the quality of life back home. “They alleviate poverty, improve nutritional outcomes, and are associated with increased birth weight and higher school enrollment rates for children in disadvantaged households.”
Changing expat profile
Researchers have documented the changing character of expatriate Indians over the years. The first phase, beginning in the early 1950s, was the outflow of mainly those with technical skills and professional expertise to the labour-hungry markets of the UK, USA and Canada, and to a smaller extent, Western Europe and Australia. In the US, highly skilled workers made up as much as 57% of the total outflow. The movement was slow and moderate.
The second phase in comparison was a stampede. The oil boom of 1973 and after created a surge of economic activity in the oil-rich countries triggering a flood of job seekers. It was characterised by demand for low-to-intermediate skill content, and high turnover and burnout rates. Large numbers returned home after an average 2-3 year stint.
The third – the New Wave since the mid-1990s – is the shift back from low-grade skilled personnel to the rapid ‘brain drain’ from universities and technical institutions to service the IT revolution in advanced countries. Short-term contracts that led to reverse migration we saw in the Gulf Cooperation Council (GCC) countries like Saudi Arabia were replaced by permanent migration of a talented workforce that became permanently part of the host countries.
The changing profile of the ex-pat ensured a galloping growth in remittances. In 1990-91, worker remittances to India were just $1.7 billion, but by 2000-01, they had rapidly grown to over $11.5 billion. Over the next two decades, this has exploded 10-fold, and we are now poised to cross $100 billion in 2022.
Why the stampede?
There’s a flip side to this story. If there are so many Indians moving abroad, and sending their earnings home, there must be some unhappiness and hurt; or is it an unfulfilled aspiration that is triggering such a large migration? It is a herculean effort to cut one’s umbilical cord with family and community, travel thousands of miles and set up a profession and home from scratch. Why are so many doing it?
The Union Ministry of External Affairs says there are 32 million Indians of various categories residing outside India, and overseas Indians comprise the world’s largest diaspora. Every year 2.5 million Indians migrate overseas, the highest annual number of migrants in the world.
When we travel through London’s Heathrow Airport, one cannot miss near retirement Punjabi women in their flowing, Pathani salwars cleaning the floors and toilets. What are doing there, we’ve all wondered. Or, the thousands of young IT specialists who flood Microsoft’s HQ at Richmond – so many Telugu-speaking software nerds that the campus magazine comes out in English, Spanish and Telugu!
Should we celebrate the achievement of these expatriates, or should we be concerned? There’s something going wrong. At the bottom of the pyramid, young men in small district towns without jobs are moving to the Gulf as carpenters and plumbers. Those with higher tech skills find their placements are not good enough, and long-term career prospects are better abroad.
Global Wealth Migration Review data showed that around 7,000 Indian millionaires moved abroad permanently in 2020. They perhaps found doing business was easier abroad. MOEF data also shows nearly 9 lakh Indians have given up their citizenship over the last 7 years since 2015. Many of these fear political persecution.
While we celebrate the breaching of the $100 billion mark in remittances, we should also see the red flag: Why are so many people looking for the good life on foreign shores?
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