Oil crisis, economic slowdown, tightening visa norms hit remittances; decline to continue in 2017
Back-to-back decline in remittances for the first time in 30 years will continue in 2017 as well, with Middle East countries still struggling with low oil prices and the United States adopting more job protection measures for their citizens
Back-to-back decline in remittances for the first time in 30 years will continue in 2017 as well, with Middle East countries still struggling with low oil prices and the United States adopting more job protection measures for their citizens, say experts.
"Not only the oil price crisis in Gulf countries, but also (US President) Donald Trump's moves to tighten the job visa issuance for foreigners is going to affect the remittance inflow in India," Jose Chacko, a Muscat-based Indian finance expert, told Firstpost.
The World Bank said on Friday that India saw an 8.9 percent drop in money sent back by its citizens from other countries in 2016, a sharp decline compared to the 1 percent dip the previous year. India saw $69.6 billion in remittance from 2014, which dipped to $68.9 billion in 2015, before falling to $62.7 billion last year.
The World Bank report says that the back-to-back decline is the first time it's happened in three decades. "Since mid-2014, global oil prices started to slip from $120 per barrel, and at a time, it even tanked to $20 per barrel, putting oil producing countries in the Gulf in trouble. Delays and cuts in wages for migrant workers and increased cost of living due to subsidy cuts further decreased the amount that migrants could remit," said Chacko, adding that this would continue in 2017 as well, since conditions have not improved.
World Bank statistics reveal that around 50 percent of remittances to India come from Gulf migrant workers and remittances amount to 3.2 percent of the GDP. Among Gulf countries, United Arab Emirates (UAE) stands first with 38 percent, and Saudi Arabia is second with approximately 30 percent.
The World Bank report states that remittances to the South Asia region declined by an estimated 6.4 percent to be at $110 billion in 2016 due to lower oil prices and fiscal tightening in the Gulf Cooperation Council (GCC) countries.
Suresh Prabhu, an Indian accountant in Oman, said that he is remitting only half of what he used to two years ago. "Citing economic crisis, my company has limited medical insurance coverage by a certain amount. If medical bills exceed, then we have to pay from our own pocket. I live with my family and medical bills drain my pocket. So, to balance my budget, I eventually remit less," Prabhu said.
Meanwhile, Ganapathy Rao, an Andhra-based mason from Saudi Arabia, said he was left in the lurch by his company nine months ago, and has still not remitted a single penny home. "I'm not getting any salary for the last nine months. The company has left us in the lurch citing economy problems. Now we have registered for Amnesty (government pardon system for migrant workers to leave country without paying any fine or facing any legal action) and will most probably return empty-handed," Rao said.
Thousands of Indian workers in Saudi Arabia were laid off by companies due to oil price crisis and they are returning home in phases through Amnesty. A study by Asif Nawaz from Jamia Milia Islamia University shows that Gulf countries are changing their preferences in recruiting Indian workers have also affected the remittance inflow.
Nawaz's study, titled 'Pakistan, Bangladesh's Surgical Strike on India's GDP', which was conducted in India, confirms that emigration from Bangladesh and Pakistan is going up and will lead to dip of remittances.
The Indian government's official data reveals that in comparison to 2015, the number of Indians migrating to six Gulf countries was short by 2.5 lakh in 2016. The World Bank report also confirms that Pakistan saw a modest growth of 2.8 percent in remittance.
In the second week of April, Moody's Investors Service had said that lower remittances from Gulf Cooperation Council (GCC) economies, which have been hit hard by the slump in oil prices, will reduce the benefits of cheaper oil imports for several Asia Pacific countries.
"Generally, weaker remittances will immediately impact the recipient countries' credit profiles via their balance of payment positions. A prolonged fall would also hurt economic growth, given the importance of remittances to household incomes," Moody's report said.
To cushion the impact, the report advises India to have diversified locations and vocations of their overseas workers to reduce the fall in remittances overall. The report finds that in sovereigns that are already facing external pressures, or where growth is weakening or anaemic, a slowdown in remittances will worsen such challenges.
Anchan CK, an international investment adviser based in Muscat, said that Donald Trump tightening immigration rules in the US will affect India's remittance inflow significantly. "The US administration is tightening immigration rules. Entry level techies will find it hard to get a US job and those who are already employed are on the verge of losing them. So, eventually, less jobs and less remittances," Anchan said.
Recently, the US Citizenship and Immigration Services has tightened the H-1B work visa rules and Australia has also abolished the 457 visa programme, a migrant worker scheme very popular among Indians looking to move to Australia.
"These moves are going to affect remittances in 2017 also," Anchan said. "In the previous years, remittances were sometimes double and triple of India's Foreign Direct Investment (FDI). In 2015, FDI was $31 billion. At that time, remittances were $68 billion. These remittances play a vital role in the Indian economy and if a dip is witnessed, the government should look into it seriously," Anchan added.
World Bank estimates that officially recorded remittances to developing countries amounted to $429 billion in 2016, a decline of 2.4 percent over $440 billion in 2015. Global remittances, which include flows to high-income countries, contracted by 1.2 percent to $575 billion in 2016, from $582 billion in 2015.
West Indies vs Australia: Shimron Hetmyer shines in Windies' comfortable win over tourists in 2nd T20I
Hetmyer’s 61 off 36 balls with four sixes and two fours paced the home side to 196 for four after they were sent in to bat yet again by visiting captain Aaron Finch
West Indies vs Australia: All-round Mitchell Marsh helps visitors win fourth T20I, secure first victory on tour
The final match of the T20I series will be played on Friday.
Both teams including support staff will immediately go into isolation after the detection of the case