The king of remit

India continues to retain its top spot in global remittance by cornering 12% of the total flows.  After a muted growth in FY16, inflows in FY17 grew 5% to $69 billion. However, overall inflows have been broadly flat at $62-70 bn over FY11-FY17, states a report by Kotak Institutional Equities. This is despite the fact that migration of Indian population to the Gulf (Oman, Kuwait, Saudi Arabia, Qatar and UAE) has been robust at 9% CAGR over FY13-FY17 compared to other developed countries. What’s interesting to note is that despite the downturn in crude cycle, the Gulf continues to attract labour. However, migration to the US has dropped to 4% CAGR over FY2013-17 compared with 6% CAGR over FY10-13.

Not surprising that the share of remittance outflows from the Gulf to India accounts for 35% of the overall outflows, though the share has seen a gradual dip over the years from 48% in FY10. The share of outflow from Saudi to India has come down from 30% in 2010 to 24% in 2017, and in the case of the UAE, it has gone down from 78% to 42%. Four states account for 59% of overall inward remittance inflows with Kerala topping the chart with 19%, followed by Maharashtra at 17%, Karnataka with 15% and Tamil Nadu with 8%. The South has a combined market share of 46% and the trend has been similar over the past few years, mentions the Kotak report.

Here again private banks have taken the lead over the state-owned banks by accounting for a significant share of the remittance market given their superior cost structure and growing penetration.  Among regional banks, Federal Bank maintained a dominant position with 24% market share followed by South Indian Bank with 10% market share. SBI, HDFC Axis have a 32%, 4% and 2% share of non-resident Indian deposits. Within Kerala, NRI deposits account for 58% of overall deposits for Federal Bank. In effect, Federal Bank holds 15% of overall inflows into the country.

The average size of remittances stood at $500 (70% share) with a major portion of the fund going towards family maintenance (59% in FY17 compared with 48% in FY13).

But the looming challenge before the country and its ramifications for the domestic economy comes from its inability to create more jobs. The problem of rising unemployment could only worsen given that according to the Asian Development Bank (ADB), the number of unskilled migrants leaving the country has been falling. The number of people leaving Indian shores has halved from 637,000 in 2011 to 391,000 in 2017.