The NRIs will be India's bulwark against global turmoil
TIL Creatives
Synopsis
NRI remittances significantly bolster India's economy, acting as a crucial buffer against global volatility and trade deficits. Inflows reached a record $129.4 billion in 2024, with the US emerging as a major source alongside GCC countries. Factors like India's economic growth, stock market performance, improved living standards, and rupee depreciation are attracting increased NRI investment across various asset classes.
By ET Online
Non-Resident Indians (NRIs) are not only India's soft power, being socio-cultural ambassadors of their motherland, but also flex hard muscles for India. In the RBI's latest monthly bulletin, central bank economists have said that calibrated policy support can help India turn global volatility into an opportunity and strengthen its position in the emerging world economic landscape. They have also added that inward remittances, along with strong services exports, will provide a buffer for the current account amid global volatility unleashed by trade wars.
Remittances account for a significant chunk of nearly 3% of India’s GDP. They are a buffer to India’s external sector, which faces challenges due to tariffs and trade wars. When India's trade deficit widens, remittances provide a much-needed cushion. being the second largest source of external financing after service exports. Increased remittances also contribute to the accumulation of foreign exchange reserves, strengthening the country's financial position.
The country received over $100 billion as remittances for the third year in a row. Globally it has been among the top recipients for over 25 years since the information technology boom in the nineties and has been consistently occupying the top most t place since 2008.
Remittances are typically linked to employment conditions in the source country and migration pattern in the recipient country. India’s stock of international migrants has tripled from 6.6 million in 1990 to 18.5 million in 2024, with its share in global migrants rising from 4.3 per cent to over 6 per cent during the same period. Indian migrants in the GCC countries account for around half of the total Indian migrants in the world.
Also Read: NRI deposits rise over 23% in FY25 till February
A survey on remittances published in a recent RBI bulletin notes, “The competitive edge and the penetration of Indian IT services overseas at the start of the century, the number of skilled emigrants to advanced economies, especially to the US, has risen significantly. Thus, besides the GCC, advanced economies have also emerged as a major source of inward remittances to India over the years”.
The GCC countries (UAE, Saudi Arabia, Kuwait, Qatar, Oman and Bahrain) together contributed 38 per cent to total remittances received by India in 2023-24, higher than its share recorded in 2020-21 (COVID-19 pandemic year).
The share of the US in India’s total remittances remained largest, rising to 27.7 per cent. The UAE, the largest hub for Indian migrant workers, maintained its position as the second largest source of India’s remittances, with its share increasing from 18 per cent in 2020-21 to 19.2 per cent in 2023-24. "This is in stark contrast to the US where Indian migrants are mainly employed in the white-collar jobs, thus explaining the higher remittances received from US despite the lower number of migrants as compared to the UAE," the article said.
For Indians, opportunities to work in foreign countries first started pouring in a big way during the seventies when the oil boom in the Persian gulf countries created openings for Indian semi-skilled workers. This led to some initial pick up in remittances. Later in the nineties, the IT boom created a huge market for Indian skilled IT professionals in advanced economies in North America and Europe. This led to a surge in remittances to India leading India to emerge as one of the top recipients of remittances.
The success of the NRIs who have reached top positions in several fields in advanced countries has led to more remittances from those countries.
Rise of the Indian Economy led by favourable demographics: India’s rapid economic growth, marked by the tag of the world’s fastest-growing major economy, has been a big factor for the country attracting investments from all over the world. Being tipped as a huge consumption and manufacturing story India is projected to become a 5 trillion-dollar economy by 2025. With structural reforms and huge spending on infrastructure, the government of the day is ensuring that the right growth drivers are in place for India to become a developed economy by 2047. We are fast approaching tipping points in higher per capita income which should lead to exponential growth over the next two decades.
Performance of the Indian Stock Market: The Indian stock market has consistently delivered strong returns over the past years and there has been large retail participation happening in the overall stock market growth story. A growing economy translates into higher stock market valuation and hence the long-term prospects of the stock markets remain upbeat in line with these growth projections. The Indian stock market is also considered among the most well-regulated in the world.
Improved Standard of Living: We are increasingly seeing the trend of reverse brain drain happening in India. With opportunities abound and the start-up ecosystem coming of age, a lot of global Indians are moving back to capitalise on this trend. The improved living standard with infrastructure upgrades is adding to India becoming an attractive destination for NRIs to own assets here.
Depreciation of the Indian Rupee: The weakening of the Indian Rupee against major global currencies offers NRIs a favourable exchange rate advantage. This depreciation makes investing in Indian assets, including real estate and equities more advantageous for NRIs earning in foreign currency.
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India's foreign exchange reserves, to which NRI remittances make a significant contribution, rose by $1.5 billion to $677.84 billion as of the week ending April 11, 2025, data released by the Reserve Bank of India showed last week.Remittances account for a significant chunk of nearly 3% of India’s GDP. They are a buffer to India’s external sector, which faces challenges due to tariffs and trade wars. When India's trade deficit widens, remittances provide a much-needed cushion. being the second largest source of external financing after service exports. Increased remittances also contribute to the accumulation of foreign exchange reserves, strengthening the country's financial position.
The $100 billion NRI remittances
Overseas Indians sent home a record $129.4 billion in 2024 with the highest ever inflows of $ 36 billion in the December quarter alone, as per an analysis of the balance of payments data released by the RBI.The country received over $100 billion as remittances for the third year in a row. Globally it has been among the top recipients for over 25 years since the information technology boom in the nineties and has been consistently occupying the top most t place since 2008.
Remittances are typically linked to employment conditions in the source country and migration pattern in the recipient country. India’s stock of international migrants has tripled from 6.6 million in 1990 to 18.5 million in 2024, with its share in global migrants rising from 4.3 per cent to over 6 per cent during the same period. Indian migrants in the GCC countries account for around half of the total Indian migrants in the world.
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Also Read: NRI deposits rise over 23% in FY25 till February
A survey on remittances published in a recent RBI bulletin notes, “The competitive edge and the penetration of Indian IT services overseas at the start of the century, the number of skilled emigrants to advanced economies, especially to the US, has risen significantly. Thus, besides the GCC, advanced economies have also emerged as a major source of inward remittances to India over the years”.
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While challenges such as high transaction costs, currency volatility, and regulatory complexities persist, the RBI's proactive measures are geared towards creating a more conducive environment for NRI remittances. By offering better returns on deposits, simplifying foreign exchange regulations, and promoting digital payment solutions, the RBI aims to bolster remittance inflows, thereby strengthening India's current account and overall economic stability.Rise of the white-collar NRI
Indian migrants in the Gulf Cooperation Council (GCC) countries account for around half of the total Indian migrants in the world. The United Arab Emirates (UAE) is the largest hub for Indian migrant workers engaged primarily in blue-collar jobs which are dominated by the construction industry followed by healthcare, hospitality, and tourism.ADVERTISEMENT
As per a recent RBI article, there is a gradual shift seen in remittance sources. "The results of the survey highlight the gradual shift in dominance of India's remittances from the GCC countries to the AEs (advanced economies) particularly the US, the UK, Singapore, Canada and Australia which together accounted for more than half of the remittances in 2023-24," the article said.The GCC countries (UAE, Saudi Arabia, Kuwait, Qatar, Oman and Bahrain) together contributed 38 per cent to total remittances received by India in 2023-24, higher than its share recorded in 2020-21 (COVID-19 pandemic year).
The share of the US in India’s total remittances remained largest, rising to 27.7 per cent. The UAE, the largest hub for Indian migrant workers, maintained its position as the second largest source of India’s remittances, with its share increasing from 18 per cent in 2020-21 to 19.2 per cent in 2023-24. "This is in stark contrast to the US where Indian migrants are mainly employed in the white-collar jobs, thus explaining the higher remittances received from US despite the lower number of migrants as compared to the UAE," the article said.
ADVERTISEMENT
For Indians, opportunities to work in foreign countries first started pouring in a big way during the seventies when the oil boom in the Persian gulf countries created openings for Indian semi-skilled workers. This led to some initial pick up in remittances. Later in the nineties, the IT boom created a huge market for Indian skilled IT professionals in advanced economies in North America and Europe. This led to a surge in remittances to India leading India to emerge as one of the top recipients of remittances.
The success of the NRIs who have reached top positions in several fields in advanced countries has led to more remittances from those countries.
Why NRIs are increasingly investing back home
Increasingly, the NRIs are investing in India across asset classes. In an interview with ET, Harsh Gahlaut, Co-founder & CEO, FinEdge, listed four reasons why India is currently attracting significant interest from NRI investors.Rise of the Indian Economy led by favourable demographics: India’s rapid economic growth, marked by the tag of the world’s fastest-growing major economy, has been a big factor for the country attracting investments from all over the world. Being tipped as a huge consumption and manufacturing story India is projected to become a 5 trillion-dollar economy by 2025. With structural reforms and huge spending on infrastructure, the government of the day is ensuring that the right growth drivers are in place for India to become a developed economy by 2047. We are fast approaching tipping points in higher per capita income which should lead to exponential growth over the next two decades.
Performance of the Indian Stock Market: The Indian stock market has consistently delivered strong returns over the past years and there has been large retail participation happening in the overall stock market growth story. A growing economy translates into higher stock market valuation and hence the long-term prospects of the stock markets remain upbeat in line with these growth projections. The Indian stock market is also considered among the most well-regulated in the world.
Improved Standard of Living: We are increasingly seeing the trend of reverse brain drain happening in India. With opportunities abound and the start-up ecosystem coming of age, a lot of global Indians are moving back to capitalise on this trend. The improved living standard with infrastructure upgrades is adding to India becoming an attractive destination for NRIs to own assets here.
Depreciation of the Indian Rupee: The weakening of the Indian Rupee against major global currencies offers NRIs a favourable exchange rate advantage. This depreciation makes investing in Indian assets, including real estate and equities more advantageous for NRIs earning in foreign currency.
