For many low-and middle-income countries, remittances act as a major source of income. 

In 2024, India received an estimated $129.1 billion worth of remittances, the highest ever for a country in any year. Moreover, India’s share in global remittances was 14.3% this year, the highest such share since the turn of the millennium for any country. The conclusions are based on a blog article published last week by the World Bank.

Remittances refer to the money that individuals working abroad send back to support their families in their home country. They are often a crucial source of income for households in developing countries and can contribute significantly to the economy of the recipient country.

Following India, Mexico and China received the largest remittances in 2024.

Chart 1 shows the top 10 receivers of remittances in $ million in 2024.

The Philippines, France, Pakistan, Bangladesh, Egypt, Guatemala, and Germany are the other countries on the list. While China was third on the list, past years’ numbers provide interesting insights.

Chart 2 shows the share of global remittances for the top 10 countries mentioned in Chart 1 in the 2000-2024 period.

China’s share of remittances grew from less than 1% in the early 2000s to over 10% by the late 2000s and early 2010s, matching India’s numbers, before gradually declining to below 10% in the late 2010s.

From 2020, the share declined rapidly reaching a two-decade low of 5.3% in 2024. According to the World Bank, China’s rising economic prosperity and an ageing population slowed the pace of emigration of less-skilled people, which contributed to this decline.

India’s share has remained above the 10% mark for most of the years since 2000, with few exceptions. In fact, in the post-pandemic years, there has been a rapid increase in its share. India’s share in global remittances was twice the share of Mexico’s in 2024 (7.5%); Mexico was a distant second.

Though India leads in absolute remittance inflows, in some economies, remittances play a more critical role in funding current account deficits and fiscal shortfalls.

To better understand this, Chart 3 depicts estimated remittances in 2024 as a share of a country’s GDP. Each circle is a country. The farther the circle is to the right, the higher the remittance in 2024 as a share of GDP. The bigger the circle, the higher the remittance in 2024 in absolute figures.

In Nepal, remittances formed over 25% of the GDP in 2024. In Tajikistan, Nicaragua, Lebanon, Samoa, Honduras, and Tonga, the share of remittances in 2024 formed over 25% of their respectives GDPs. In India, remittances formed 3.3% of the GDP this year.

For many low-and middle-income countries, remittances act as a major source of income. In 2024, these countries received $685 billion as remittances, the highest ever in a year. According to the blog, remittances to these countries have consistently outpaced other types of external financial flows.

In recent years, remittances have even surpassed Foreign Direct Investment (FDI) in low-and middle-income countries put together. FDIs are investments by a foreign country to control or run a business in another country. Remittances are also much higher than the official development assistance (ODA) received by these countries. ODA is the aid from rich countries to help poorer ones develop, often through grants or cheap loans.

Chart 4 compares remittances, FDI, and ODA received by low-and middle-income countries between 2000 and 2024.

Over the past decade, remittances increased by 57% while FDI declined by 41% in low-and middle-income nations, the blog notes.

Source: The data for the charts were sourced from a blog article published by the World Bank on December authored by Dilip Ratha, Sonia Plaza and Eung Ju Kim

vignesh.r@thehindu.co.in

“Global activity and world trade firmed up at the turn of the year, with trade spurred by strong exports from Asia,” the IMF said. Image for representation.
| Photo Credit: AP

The International Monetary Fund (IMF) held global growth expectations for 2024 steady in a report on July 16 even as it cut forecasts for the United States and Japan, while warning of inflation risks and trade tensions ahead.

The IMF expects the world economy to grow 3.2% this year, unchanged from its April forecast, according to its World Economic Outlook update.

“Global activity and world trade firmed up at the turn of the year, with trade spurred by strong exports from Asia,” said the fund.

For 2025, it expects global growth of 3.3%.

But even as many countries saw better growth than anticipated early this year, the IMF flagged surprises in Japan and the United States.

The Washington-based lender also cautioned that risks to inflation have increased, with services prices holding up disinflation.

This increases the prospect of interest rates staying elevated for longer, “in the context of escalating trade tensions and increased policy uncertainty.”

Trade measures surged

“We see an explosion in the number of trade restrictive measures,” IMF chief economist Pierre-Olivier Gourinchas told a press briefing on July 16.

Over 3,000 such moves were implemented last year, up from an already-high level of 1,000 in 2019.

These take the form of export restrictions and industrial policies, leading to retaliation, he said.

“One concern we have is that going forward, this will weigh down on global activity,” he noted.

The IMF’s report warned that a resurgence of tariffs can trigger retaliation and a “costly race to the bottom.”

On whether risk assessments shifted after the attempted assassination of former U.S. president Donald Trump, the Republican Party’s nominee in November’s election, Mr. Gourinchas earlier told AFP the fund will consider its implications.

On July 16, he said 2024 is an election-heavy year, adding “there could be some increase in in trade measures” and distortions on industrial policy which could spill over to other countries.

EDITORIAL | Sobering assessment: On the IMF forecast, World Bank report

China concerns

While world growth appears stable, the IMF lowered projections for the United States and Japan.

U.S. growth in 2024 was downgraded to 2.6%, 0.1 percentage points below April’s forecast, due to a “slower-than-expected start to the year.”

Japan’s economy was seen expanding 0.2 percentage points less than expected, by 0.7% this year, mainly thanks to temporary supply disruptions and weak private investment in the first quarter.

The euro area meanwhile is showing signs of recovery with relatively strong services activity, Mr. Gourinchas said, although manufacturing shows weakness.

China and India are expected to power activity in Asia — with China’s 2024 forecast revised up to 5.0% on a private consumption rebound and strong exports.

But Mr. Gourinchas flagged risks to the world’s second biggest economy stemming from weak confidence and unresolved property sector problems.

Should domestic demand weaken, China would rely more on the external sector — a situation countries like the United States are pushing back against.

“An increase in the trade surplus might be small from (China’s) perspective. It could be big from the perspective of the rest of the world,” he said.

OPINION | The high cost of a global economic decoupling

Inflation risks

There also remain risks of sticky inflation amid renewed trade or geopolitical tensions, the IMF cautioned, even as it expects inflation to return to target by end-2025.

Wage growth, if accompanied by weak productivity, could make it tough for firms to ease price increases.

An escalation of trade tensions could also raise near-term inflation risks, by lifting costs of imported goods, IMF said.

Higher inflation could heighten the chances that interest rates stay elevated for longer, increasing financial risks.

The IMF called for careful monetary policy adjustments.

Image of diplomats shaking hands for representation only
| Photo Credit: SANDEEP SAXENA

India and Nigeria have identified areas such as crude oil, natural gas, pharmaceuticals, Unified Payments Interface (UPI), local currency settlement system, and power sector to increase cooperation for boosting economic ties.

The commerce ministry on May 3 said that these issues among others were discussed during a recent visit of a seven-member delegation from India to Nigeria.

The delegation was led by Additional Secretary, Department of Commerce, Amardeep Singh Bhatia.

The Indian delegation consisted of officials from Reserve Bank of India (RBI), EXIM Bank of India and National Payments Corporation of India (NPCI), the ministry said in a statement.

It said that both sides identified several areas of focus for enhancing bilateral trade as well as mutually beneficial investments.

“These include resolving of market access issues of both sides, and cooperation in key sectors such as crude oil and natural gas, pharmaceuticals, UPI, local currency settlement system, power sector and renewable energy, agri and food Processing, education, transport, railway, aviation, MSMEs,” it said.

They also agreed to early conclusion of Local Currency Settlement System Agreement to further strengthen bilateral economic ties.

Nigeria is the second largest trading partner of India in Africa region.

Bilateral trade between India and Nigeria declined to $7.89 billion in 2023-24 from $11.8 billion in 2022-23.

With a total investment of $27 billion, about 135 Indian companies are actively engaged in Nigeria. These investments traverse diverse sectors, encompassing infrastructure, manufacturing, consumer goods and services.

Russia’s state-owned reinsurer has given financial backing to three Russian insurance firms, allowing them to get Indian approval to provide marine insurance cover to tankers, two sources said, as Moscow seeks to facilitate trade with India amid Western sanctions.

A raft of sanctions by the U.S. and allies against Moscow over its Ukraine invasion, along with tighter scrutiny of Russian oil trade, has almost cut Russia off from the global network of service providers such as insurers and brokers.

Russian companies Sogaz Insurance, Alfastrakhovanie, and VSK Insurance, have joined Ingosstrakh as insurers approved by India for providing marine insurance cover, an order posted on Indian shipping regulator’s website showed.

India has approved the three new insurers after Russian National Reinsurance Company (RNRC) provided a financial guarantee, the two sources with direct knowledge of matter said.

This is the first time RNRC’s role in providing financial backing to the three Russian insurers to get accredited in India has been reported.

“With the backing of the Russian National Reinsurance Company, a wholly-owned entity of the Russian Government, these insurers boast robust financial support and stability,” one of the sources said.

Insurance is essential for maritime transport, particularly oil cargoes that require the highest safety standards due to the risk of spills.

Sogaz Insurance, Alfastrakhovanie and VSK Insurance representatives and an RNRC representative did not immediately respond to requests for comment.

RNRC, controlled by the Russian central bank, was sanctioned by the UK and European Union in 2023.

India’s Directorate General of Shipping did not respond to a Reuters email seeking comments.

“Ingosstrakh is not expanding its maritime insurance activities to India. Our relationship with India in the marine insurance industry has spanned over 57 years, dating back to 1967 when we opened our office in Mumbai,” an Ingosstrakh spokesperson said in an emailed statement.

The three Russian insurers, which specialise in protection and indemnity (P&I) insurance coverage, are not part of the Europe-based International Group, which is made up of twelve so-called P&I clubs.

The IG says it provides marine liability cover for approximately 90% of the world’s ocean-going shipping tonnage.

“A due procedure has been followed (by the Indian shipping regulator) for including these new entities in the list of non-IG companies that can provide insurance,” one of the two sources said.

Major Supplier

The Group of Seven (G7), the European Union and Australia have imposed a $60 per barrel price cap for Russian oil if Western services such as shipping and insurance are used.

The aim is to squeeze Russia’s oil revenues while keeping the supply to the market stable.

Russia has emerged as a major oil supplier to India, the world’s third biggest oil importer and consumer, as its oil is sold at a discount after Western nations halted purchases from Moscow.

The Indian government has said that the country abides by United Nations sanctions and does not follow those imposed by any other country.

A source from one of India’s refiners said banks are very strict in clearing payments for Russian oil to ensure that Russian crude is priced below the $60 per barrel cap.

The price cap mechanism bans Western companies from providing maritime services, including financing, insurance, and shipping for oil sold above the cap.

“Why would Russia like to forgo its revenue from insurance premiums and give it to the western insurers. It is not a small amount,” this source said.

“Even if Russia is legally allowed to use Western services they don’t want to use them,” he said.

“This also means they have to share details of their dealing with the (Western) service providers.”

Indian refiners buy Russian oil on delivered basis mostly from traders to avoid any liability arising due to sanctions before discharge of oil cargoes.

The accreditation of the three Russian entities is valid until Feb. 20 next year, but authorisation for Russia’s Ingosstrakh has been extended by five years to Feb. 20, 2029, an order posted on the website of India’s Directorate General of Shipping website showed.

World Bank President Ajay Banga. File.
| Photo Credit: Reuters

World Bank President Ajay Banga said on October 24 that geopolitic tensions pose the biggest threat to the world economy, but that risks “tend to move around” fast, so others should not be ignored.

“The U.S. 10-year Treasury [yield] just crossed 5% briefly yesterday, these are areas we haven’t seen. So yes, that is right there lurking in the shadows,” Banga said during the annual Future Investment Initiative (FII) in Riyadh.

“And then, how long before the next pandemic?

“There is so much going on in the world and geopolitics in the wars that you’re seeing and what just happened recently in Israel and Gaza. At the end of the day, when you put all this together, I think the impact on economic development is even more serious,” he said.

“While everything looks better than we expected it to look in the developed world some time ago, I think that we’re at a very dangerous juncture.”

Marrakech:

As the lingering effects of the Covid pandemic and the Russia-Ukraine war continue to be felt, it’s been a challenging few years for the global economy, but there are rays of hope as well. In an exclusive interview with NDTV in Marrakech, the International Monetary Fund’s Gita Gopinath spoke about the macroeconomic stability in India, the headwinds in China, artificial intelligence, extreme weather events and how all of these will impact the trajectory of the world economy in the coming years.

Speaking on the sidelines of the 2023 World Bank Group – IMF Annual Meetings, the First Deputy Managing Director of the IMF also spoke about the impact of the conflicts between Israel and Gaza and Russia and Ukraine on oil prices and food security. 

Boundless Potential, Some Concerns

Emphasising that it is early days to assess the true potential of artificial intelligence, Ms Gopinath said the promise of generative AI could raise productivity and help boost slowing global growth. 

“But it is far from certain at this point whether we are going to get all that productivity gain. Obviously, the innovation is important but it is going to require regulation. This is not business as usual, this is a very different animal that we have to deal with in terms of regulation. We have to make sure AI is used so that it actually benefits humanity,” she said. 

Ms Gopinath said governments will need plans and account for the possibility of a lot of workers being affected directly by AI, and some losing their jobs. 

“What we have seen traditionally with technology is this concern that it will cause a lot of layoffs and doesn’t really help create jobs. And what history has taught us is that, on net, a lot more jobs are created. They are in different sectors and demand different skills and so there are people who get affected and lose jobs but that’s where policy plays a role in making sure that they get the right support they need,” she said.

The senior IMF official also said that AI will have an impact on the general pay structure. “It is very interesting, the early studies that are coming up. In the past, as a new entrant to a particular industry, you didn’t have the experience, you had to wait to learn and therefore the pay you got was not as much. With AI you get to use the experience that others had and you get that information really quickly. So we could see somewhat more of a flattening of the pay structure. “

India Third-Largest Economy?

Asked about India’s economic growth and whether the country is on course to becoming the third-largest economy in the world by 2030, Ms Gopinath said, “India has strong growth. At 6.3%, it is one of the largest growth numbers that we have among major economies. We have 6.3% for this year and 6.3% for next year. We did the upgrade because the first quarter data came in somewhat stronger than we had expected.”

“If there is this continuing amount of public investment that happens, that seems to be catalsying private investment and consumption is holding up better than we expected, so I think those are good signs. In terms of the trillion-dollar number that India gets to, I am always a bit cautious because in the last three years we had the pandemic and Russia’s invasion of Ukraine. I wouldn’t want to venture into talking about particular dates,” she added.

Mr Gopinath pointed out that the important thing is that India’s economy is strong, there is macro stability and inflation is coming into the RBI’s target band. “The financial sector is the strongest it has been in a long time. If you combine that with structural reforms, a lot of which is still needed, that could generate a lot of growth in India,” she said.

China Concerns

Ms Gopinath said the IMF had downgraded China’s growth projection slightly, from 5.2% to 5% for this year, and the organisation sees growth slowing down in China in the coming years. She emphasised that the property sector is an important concern and so are its ageing population and weaker productivity growth.

“In terms of spillovers to Asia as a whole, the estimate we have is that when China’s growth goes down by 1 percentage point, it shaves off about 0.3 percentage points out of growth over a five-year period for Asian regions. If I look at India specifically, I don’t see strong direct spillovers. We don’t expect to have a big effect of India slowing down. But if there is a more general slowdown in the global economy that comes from Asia slowing down, of course that would feed into growth for India,” she said. 

World Growth, Food Insecurity

Asked about the reasons behind the global growth outlook for 2023 being 3%, well below the pre-pandemic levels, Ms Gopinath pointed to ageing demographics and weakening productivity. She said China plays an important role in this. 

On food insecurity stemming from the Russia-Ukraine conflict, she said it affects low-income countries the most because they spend a big percentage of their consumption basket on food. She asserted that while food prices have come down, they are still quite high and that remains a concern. 

Ms Gopinath said that among the measures taken by the IMF to address this was the creation of the Food Shock Window to help countries in need. 

Climate And The Future

Ms Gopinath said that while there is an increase in extreme climate-related disasters and the economic cost of that is adding up, the implications for global growth are small for now because the larger economies are doing relatively okay.

“For individual countries, small island nations, this can be very, very big. Even in India, temperatures are going up at twice the rate that it’s happening, on average, in the world. So it is quite vulnerable,” she said.

The IMF official pointed out that India played a big role in pushing for the reforms of Multilateral Development Banks through its G20 leadership and she sees momentum on that front. She also said the inclusion of the African Union into the G20 is very important because most of the working-age population will be on the African continent over the next many years.