Benefits of domestic remittances to Indian Economy

Benefits of domestic remittances to Indian Economy

Question - Domestic remittance market is growing at an extremely fast pace. Discuss the benefits of domestic remittances for furthering the Indian growth story


• Increased domestic remittances have a positive impact on the nation’s economic growth.

• Remittances of emigrated workers can exert a positive influence on the growth of the home nation
• These funds can finance dynamic investment

• They can also increase and raise financial resources for growth and development

• Granting more credit to companies in markets for short or long term loans is another benefit of domestic remittances from bigger towns

• Domestic remittances also eliminate difficulties associated with credit rationing

• These remittances finance needs for consumption or capital expenditures

• On a macroeconomic level, raising the total capacity of financing of investments through domestic remittances will improve the local economic situation

• Domestic remittances can also provide support in counter-cyclic conditions when when local market situations are not favourable

• Advancement of such a financial system in the developing or emerging nations can initiate growth and development; domestic remittances play a crucial role in this

• Flow of domestic remittances enables banks to intervene in the routing of the flows and increases the liquidity of the banks

• This facilitates easy credit, especially to SMEs

• Domestic remittances also encourage foreign investment to remain in emerging or developing markets such as India

• Domestic remittances also eliminate poverty

• These funds can contribute to the building of human capital and support families of migrant workers

• In this way, domestic remittances can contribute to the development of human resources and growth of total factor productivity of the local economy

Facts and Stats

• Domestic remittance market is expanding at a faster pace in India through money transfer channels, business correspondents as well as mobile money transfer

• As per the Hindu, around 100 million migrants have travelled to Tier-1 cities for jobs

• This has led to an increase in overall domestic remittance market at an average rate of 10.3% from 2007 to 2013.

• Remittances from migrant workers add to more than 50% of the overall domestic remittances market

• Migrant workers send money through instant money transfer rather than NEFT because of the efficiency and convenience of these products

• 70% of the un-banked misses in the nation need domestic money transfer services

• Close to an equal percentage of remitters send around INR 5,000 per month
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