Rupee Depreciation = Record Remittances: Benefits for the Economy

Rupee Depreciation = Record Remittances: Benefits for the Economy

Question: Depreciation of the Indian rupee has some positive impacts on the Indian economy too. Discuss how the country has received record number of remittances due to this factor and how it helps the economy.

• Depreciation in the Indian rupee has created a positive impact on remittances

• Country has witnessed 50 to 80 percent rise in remittance activity from numerous countries including the Gulf regions in the past three months

• A similar trend was observed in 2014, 2013 and 2012 when there was sustained depreciation of the Indian Rupee

• Currently the Indian Rupee is around INR 63 to 64 per dollar

• Remittance growth has consolidated in India as a result of this and maintained global leadership for India in this sphere, with USD 70.4 billion inward remittances, according to a WB estimation
• High Networth Individuals/HNIs cash in on pricing difference and remit more money back home

• In case the rupee continues the declining trend, high ticket remitters will ensure capital flows into the country

• This will boost consumerism which forms the bulwark of a healthy economy

• While the cost of sending remittance globally is an average of 8%, it is only 4% in India

• G20 Summit leaders proposed increasing remittance costs to 3% by 2030

• With more Jan Dhan accounts and cash to cash remittances, service providers have reduced fee for account to account transfers in high volume corridors such as India

• Migrants remittances have reached USD 436 billion to developing countries; this marks a 4.4% increase over the 2013 level

• Flows to developing countries will slow down to 0.9% growth in 2015 amounting to USD 440 billion in contrast

Facts and Stats

• Remittances in India are projected to grow at par with the South Asian region at 3.7% in 2015

• There is considerable scope for fiscal expansion in GCC nations for Indians working abroad

• Remittances in India contribute to 25% of the total foreign exchange reserve in the nation

• Remittances contribute 4% to the nation’s GDP

• India is one of the most cost effective markets to receive remittances

• Global remittance receipts, including both developing and developed countries, were pegged at $583 billion in 2014, and will to $586 billion in 2015 and $636 billion in 2016, according to World Bank estimates.
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