NRIs beat FDI, keep the money coming

Remittances or private money transfers from non-resident Indians (NRIs) have been rising steadily despite a slowdown of the global economy and have become a more reliable source of funds for many Indian families compared with the tangible volume and benefits of foreign direct investment (FDI).

Official data for the past three years show that while FDI inflows fluctuated and even dipped, inward remittances were upwardly mobile.

In 2011-12, NRI remittances were $66.13 billion (Rs. 3,42,884.05 crore), against an FDI inflow of $46.84 billion into the country. Inward remittances have been on an upswing over the past three years, unaffected by factors, such as a fragile global economy and boosted by a falling rupee, of late.

The Gulf countries (West Asia) and North America are the two top sources of remittances to India, with Europe placed a distant third.

A Reserve Bank of India study finds that 30.8% of total foreign remittances came from West Asia, while 29.4% came from North America and 19.5% came from Europe.

The study also said that 40% of all such remittances were used for household expenses.

These remittances now account for around 4% of gross domestic product (GDP).

Kerala, Tamil Nadu, Punjab and Uttar Pradesh are among the top remittance-receiving states in India.

In 2011, remittances to Kerala clocked R49,965 crore, accounting for 31.2% of its GDP, according a Kerala Migration Survey, conducted by the Centre for Development Studies (CDS) for the ministry of overseas Indian affairs.

In other words, remittances were more than six times the money Kerala gets in Union government assistance.

According to World Bank estimates, in 2011, the other major inward remittance beneficiary countries were China ($57 billion), Mexico ($24 billion), the Philippines ($23 billion), and Pakistan and Bangladesh ($12 billion each).

However, compared with the Indian official figure, the World Bank's figure for India was $58 billion.

Although, the amounts are different in the two estimates, India tops the chart for top remittance-receivers in the word.

The Indian official figure states that remittance to the country was $55.62 billion in 2010-11, which rose from $53.64 billion in 2009-10.

When compared with remittance figures, there was no great cheer on the FDI front in 2010-11.

That year, India received an FDI of $34.84 billion, which was lower than the corresponding figure of $37.74 billion in 2009-10, according to data from the industrial policy and planning department.

Government officials also say a depreciating rupee and higher interest rate for deposits are driving NRIs to park more of their money in the country.

"The interest rates our banks offer are more than that of developed countries and even the Gulf countries, where over six million Indians work," an official said.

S Irudayarajan of CDS, an expert on migration studies, says, "This trend of rise in remittances is here to stay. Indians prefer to park their money back home, which they find a very safe option. The falling rupee has also been a windfall for them."