Great relief for India as it sustained dollar inflows from abroad during the Corona era

- The role of remittances is important in maintaining the balance of payments of the country

In the year 2020, when the whole world was facing the Corona epidemic, it was seen that Indians living abroad provided help to their homeland directly or indirectly. Despite the global recession, remittances to India last year stood at 3 billion, down only 0.50 per cent from 2015. China lags behind India in receiving remittances. According to a World Bank report, China's remittances will reach ૫ 2.50 billion in 2020, up from ૬૮ 2.50 billion in 2016. In 2016, India received 2.50 billion in remittances. In addition to foreign trade, the dollar also inflates privately in India. These inflows mainly include (1) remittances for family expenses, (2) money withdrawn locally from non-resident accounts, (2) gold and silver brought in through luggage, and (3) personal gifts. The share of remittances from private transfer workers is the highest. This estimate can be deduced from India's balance of payments figures.

The reason for the modest decline in remittances in 2020 is the decline in remittances from the United Arab Emirates. Remittances from the UAE fell by 12 per cent last year. The reason behind this is said to be the slowdown in its oil economy. Remittances are highest in poor and middle-income countries. However, the reason for the high number of remittances in India is the high number of Indians who have gone to work abroad. Among the countries with the highest outflow of remittances, the US topped the list with 4 billion, followed by the UAE with 4 billion. Most of India's remittances come from the Gulf countries.

Given India's strong grip on trade services, especially in the IT sector, remittances from employees in the sector are not growing as they should. With foreign governments, especially the US, tightening visa standards, India's IT professionals have lost opportunities to earn money abroad. Remittances from IT professionals who have been working in the IT sector for a few years in the US and other developed countries were expected to increase compared to semi-skilled workers going for employment in the Gulf, but this did not materialize.

The share of remittances from North America was high in the middle of the first decade of the new century, which began in 2000, in 2006-07. The country's IT sector saw an increase in remittances from that area due to the wide opportunity it got in the US. It was not India's export policy or IT sector but the favorable foreign policy of foreign governments, especially the US, that worked for India, given the boom in revenue from exports of software and IT-enabled services seen in previous years. As a result of US policy for foreign workers, India's IT sector has made significant progress. However, times have changed and the share of India's IT and IT enabled services sector in dollar inflows from abroad is declining.

The Government of India raises the export target every year to increase the country's balance of payments but it does not succeed. India's exports have fallen far short of the કારણે 200 billion target in the last financial year due to the Corona. India's performance on the export front remains poor. So far, the rupee has weakened against the dollar, posing a number of challenges to the Indian economy. The Reserve Bank tries to control the situation by intervening at the time of rupee volatility. With the US dollar being the safest currency in the world, India has to take steps to increase the flow of dollars if it is to maintain its financial position. In addition to expanding Indian trade in view of weak export figures, India needs to work harder to establish a presence in the countries that are our main export hubs. Only then will it help reduce the current account deficit and strengthen the balance of payments position.

Temporary measures such as an increase in customs duty will not succeed unless policy measures are taken to address the structural problems affecting India's current account deficit.

The economic reforms of the early 1990s were expected to give a new impetus to India's economy and boost exports in the manufacturing and services sectors. On the export front, the contribution of the service sector has increased but India has not yet been able to increase the expected growth in the manufacturing sector. Measures of economic liberalization like those taken in many emerging countries like India have failed and the new system has become a challenge for them or they are retreating from it. However, such a situation is not seen in India and the reason is the huge inflow through remittances every year. It would not be wrong to say that if the inflow of remittances in addition to income from exports had been slow, the expected results of India's liberalization policy would not have been seen and the country would have been forced to find new ways to maintain its balance sheets.