Chapter 8
Shocks Affecting the Flow and Stability of Workers’ Remittances to India BHUPAL SINGH
Workers’ remittances are generally known to be countercyclical and in the Indian context they have provided stability to the current account balance of the balance of payments (BOP).1 Compared with other forms of cross-border flows, migrant remittances are less likely to be procyclical, which makes them a relatively stable source of external finance. This nature of remittances was evident during 1998–2001, a period characterized by a decline in private capital flows to developing countries in the wake of the Asian financial crisis. Given the stability and resilience of workers’ remittances, many developing countries are taking measures to further attract such inflows. The surge in migrant workers’ remittances during the 1980s, responding to the oil boom in the Middle East and during the 1990s to the new wave of the information technology revolution, has placed India among the highest remittance-receiving countries and provided considerable resilience and sustainability to India’s BOP. Policies to improve banking access and the technology of money transfers have also helped increase the flow of remittances and promoted their transfer through formal channels (B. Singh 2010). Numerous regulatory measures have also been undertaken in India to facilitate institutional development for wider access to remittance services, enhancing competition by entry of private money transfer agencies in the market and easing of documentary requirements for small-value remittance transactions. Regulatory measures also aim to bring transparency in the operations of entities dealing with the remittance transfer business. In fact, competition and transparency are critical to bringing down the costs at the recipients’ end.
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