Remittances: India is world no. 1

With record inflows of $21.7 billion, India is among the top three countries worldwide to receive the maximum amount of remittances followed by China and Mexico.

According to the World Bank Global Economic Prospects report for 2006, China received $ 21.3 billion and Mexico $18.1 billion in 2004.

While estimating the overall growth in South Asia at 6.9 per cent in 2005, up from 6.8 per cent in 2004, it said this year's performance reflects stable growth of about 7 per cent in India.

Of the other South Asian countries, the report said Pakistan received remittances worth $3.9 billion and Bangladesh $3.4 billion. Sri Lanka's remittance receipts were larger than tea exports, and in Nepal, remittances accounted for nearly 12 per cent of its GDP.

The report pointed out that remittances sent from developing countries - the 'South-South flows' - represent 30-45 per cent of total remittances. It forecasts that South Asia will be receiving some $32 billion in remittances this year or a 67 per cent increase from 2001.

Remittances recorded worldwide in 2005 are estimated to exceed $232 billion. Of this, developing countries are expected to receive $167 billion, more than twice the level of development aid from all sources, the report added.

The growth in South Asia, the report said is estimated at 6.9 per cent in 2005, up from 6.8 in 2004, while the regional GDP for 2006 is expected to slow to 6.4 per cent, adding this year's performance reflects stable growth of about 7 per cent in India, and a 6.6 per cent growth in Pakistan.

It pointed out that the overall impact of the October quake on growth in Pakistan is expected to be minimal.

This year's main focus has been on remittances and migration with the report noting that an increase in migrants would raise work force in high-income countries by 3% by 2025 and increase global income by 0.6%, or $56 billion.

"With the number of migrants worldwide now reaching almost 200 million, their productivity and earnings are a powerful force for poverty reduction," said Franis Bourguignon, World Bank chief economist and senior vice-president for development economics.

"Remittances, in particular, are an important way out of extreme poverty for a large number of people. The challenge facing policymakers is to fully achieve the potential economic benefits of migration, while managing the associated social and political implications," he added.

The GEP authors suggest that remittances sent through informal channels could add at least 50 per cent to the official estimate, making remittances the largest source of external capital in many developing countries. One of the GEP's recommendations has been to reduce formal remittance costs to enhance remittances flow.

The argument has been that reducing remittance costs would do more to encourage the use of formal remittance channels than will regulation of so-called informal services.