During a long stint working abroad in Africa about 10 years ago, I noticed an interesting phenomenon that appears to be a common thread tying together many developing countries. This thread is essentially the flow of capital from relatively richer to relatively poorer countries. The concept of sending money home, i.e. foreign remittances, for migrant workers is one of the primary reasons many make the sacrifice to be away from their families for extended periods.
Not only because of the sheer volume of the migrant labour force from India, but also because of the ultimate desire of many to eventually return home to a better life, of all the countries to which money is remitted by foreign workers, India currently ranks the highest.
Last year, India, China, Philippines, Mexico and Nigeria topped the list. According to the World Bank estimates for migrant labour remittances, a total of over US$ 180 Billion was submitted by these five countries alone with India leading the list with US$70 Billion in foreign remittances and China coming in a close second with just over US$65 Billion.
Analysts believe that one trend that differentiates the capital inflow from foreign labour to India is that unlike many countries in Africa, India finds itself in the lucrative position of having highly skilled labour exports. Whilst countries like South Africa battle with relatively low-value migrant labour in blue collar roles like mining, India’s expertise in the technology space accounts for a large chunk of the local remittance statistics.
Demand for such resources have, fortunately for India, failed to decline as dramatically as the global economy has. Make no mistake, India is certainly feeling the impact of the economic slowdown but the remittance figures have been surprisingly resilient. The largest hurdle it seems is that jobs for new migrants are harder to find and policy moves to the right in many of the affected economies are making it increasingly difficult for Indian nationals to secure new work visas.
Those workers that are already abroad are quite aware of this and appear happy to stick it out as long as possible. Despite relatively high inflation in India, their earning power is still significantly greater than it would be had they remained in India. The benefits for them of working abroad also extend to a better quality of life, more facilities and generally better work-life balance. Working life in India, as any expat in India is likely to tell you, is far from easy when compared to the West. Long hours and bureaucratic processes are unfortunately par for the course.
Forex rate fluctuations over the past couple of years have even made it more lucrative for Indian workers abroad. The devalued Indian rupee means that each dollar earned abroad carries that much more weight back home. As the American economy recovers and the dollar strengthens further, this is likely to remain the case for some time to come.
As e-wallet technologies have become more commonplace, Indians abroad are smartly using many of the online deposit options, which were largely intended to fund international players wanting to gamble at some online casino or to play lottery, for their foreign remittances to their families in India. These electronic deposit methods have tremendously reduced the cost of transfers and their use is likely to increase going forward as Indians and other migrant workers become more comfortable with and trusting of the technology.
If ever there was an economic development case to be made supporting the mobility of labour, this would be it. The amount remitted to many developing countries now exceeds the countries international development loans. As the move toward a knowledge economy progresses steadily, it’s likely that investment in better technology infrastructure in India would reap huge rewards. Whilst this move may ultimately reduce migrant remittances in the long run, India will still be better off. Imagine earning dollars whilst working at home in India – surely this is the best of all worlds!