The Economic Times
India gets $21.7 bn from NRIs (non-resident Indians) in 2005 CHIDANAND RAJGHATTA
TIMES NEWS NETWORK[ FRIDAY, NOVEMBER 18, 2005 11:40:30 AM]
WASHINGTON: Developing countries, including India, are benefiting enormously from the migration of their workforce and the resulting foreign exchange remittances, a new World Bank study has said.
In fact, India is among the biggest beneficiary of this trend, World Bank's Global Economic Prospects (GEP) for 2006, the central theme of which is migration and remittances, has reported. Officially recorded remittances worldwide exceeded $232 billion in 2005, with India receiving almost 10% of the amount ($21.7 billion).
China came second with $21.3 billion, followed by Mexico ($18.1 billion), France ($12.7 billion), and the Philippines ($11.6 billion).
The GEP authors say remittances sent through informal channels could add at least 50% to the official estimate, making remittances the largest source of external capital in many developing countries.
International migration can generate welfare gains for migrants and their families, as well as their origin and destination countries, if policies to better manage the flow of migrants and facilitate the transfer of remittances are pursued, the GEP report for 2006 said.
Remittances account for the largest proportion of gross domestic product in smaller countries such as Tonga (31%), Moldova (27.1%), Lesotho (25.8%), Haiti (24.8%), according to the report.
While remittances have long been thought to be among India's financial lifelines, the extent of money flow from migrating workers detailed in the World Bank report is quite startling.
NRI remittances is nearly four times more than FDI in India, estimated at around $ 5 billion last year. Overall, developing countries received $167 billion, more than twice the level of development aid from all sources.
''Remittances from migrating workers has been found to significantly reduce poverty in developing countries,'' Dilip Ratha, one of the authors of the GEP report said. In countries such as Ghana and Uganda, remittances mostly flow to poor families resulting in poverty reduction to the extent of 5-10%, Ratha said.
The report also suggests that developing countries benefit more from migration than higher income countries.
''The relative gains are much higher for developing-country households than rich-country households, rivalling potential gains from global reform of merchandise trade,'' the authors conclude, with $162 billion going to new migrants, $143 billion to people living in developing countries, and $51 billion to people living in high-income countries.
To achieve these gains, the GEP proposes that developing countries seek agreements with countries to which their nationals migrate, to improve the conditions under which they cross borders, seek and maintain employment, and send a part of their earnings home.
The report says migration ''should not be viewed as a substitute for economic development in the origin country as ultimately, development depends on sound domestic economic policies.''