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Importance of NRI money

PTI | By, New York
Nov 22, 2004 04:21 AM IST

Senior World Bank economist Dilip K Ratha speaks to Kiran Bharthapudi on benefits of NRI money transfer.

Dilip K Ratha is a senior economist at the World Bank in Washington DC, and has been acknowledged by the United Nations as one among the top international experts on migrant remittances. Prior to joining the World Bank, he taught Macroeconomics at the Indian Institute of Management, Ahmedabad. He has PhD in Economics from Indian Statistical Institute, New Delhi and recently was part of a panel discussion on Remittances by Emigrants as a Source of Financing for Development at the United Nations Headquarters in New York. Kiran Bharthapudi spoke to Dr Ratha on the issue of Remittances in the Indian context.

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Q: In plain terms, what are remittance flows?

A: Millions of immigrants, especially those working in the developed world, send money to their homelands on a regular basis. Remittances in simple terms are personal money transfers made by migrant population to their home countries.

Q: So, what is the global trend on remittances or these money transfers?

A: They are larger in 36 countries than any other capital flows. In something like 20 or even 30 countries, if you include unrecorded remittances they are larger than a third of the national income. In Sri Lanka they are more foreign exchange income than the tea exports, in Mexico there about the same amount of foreign exchange as oil exports. In Tajikistan, in Lesotho and in many of other countries they are in excess of a third of their GDP. Officially recorded remittances received by the developing countries exceeded 93 billion dollars in 2003 and will exceed 100 billion dollars at the end of this year. In fact, remittances have become major source of external finance for developing countries second only to direct foreign investment.

Q: More specifically focusing on India, how are money transfers helping Indian economy?

A: India usually has been the largest receipt on remittances over the years. Saudi Arabia and the United States are the two largest sources of NRI money transfers to India. Money transfers to India are expected to reach $ 17 billion by the end of this year. At somewhere between $15 and $20 billion every year, workers' money transfers or remittances are significantly larger than all the official and private capital account to India. Indeed, they have tended to rise during hard times. Remittances have proved to be a very important source of income for a large number of Indian households.

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