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Why Bangladesh leads in remittance outflow from India

World Bank data show the neighbouring country cornered 54% of the $7.6 billion flow in 2014

Namrata Acharya  |  Kolkata 

Why Bangladesh leads in remittance outflow from India

In the 1970s and ’80s, a large pool of migrant labourers from Bangladesh in Kolkata’s construction sector had no reservations in revealing their identity. Cut to 2016 and there are, officially, hardly any workers from Bangladesh in the sector, according to a city-based real estate developer. Yet, recent World Bank data (Bilateral Remittance Matrix, 2014) show, of the $7.6 billion of outward remittances from India, 54 per cent or $4.16 billion was to Bangladesh alone in that year. Almost every year, 50-55 per cent of India’s total outward remittances are to Bangladesh. Geographical proximity, a large pool of undocumented migrant labour, porous borders, historical ties and, more recently, the increasing interest of Indian companies in Bangladesh are some of the reasons behind the trend. At present, non-banking finance companies are not allowed to facilitate outward remittances from India to there; all the transactions must be routed through banks. However, for major global remittance companies, Bangladesh is a major market. Promoth Manghat, chief executive officer at UAE Exchange, says: “Actual outward remittances from India are much more than any official figure. Globally, Bangladesh is a major market for remittances for us. We are actively looking at starting remittance services from India to Bangladesh but regulations do not allow us to do so. We are in dialogue with the regulators.” Migration and remittances Why Bangladesh leads in remittance outflow from India According to India’s 2001 census data, 5.1 million persons were reported as migrants. Nearly three million were from Bangladesh, 900,000 from Pakistan, 500,000 from Nepal and 100,000 from Sri Lanka. That’s only part of the story, for research documents indicate India is home to a large pool of undocumented migrants, especially from Bangladesh and Nepal. Interestingly, after Bangladesh, Pakistan accounts for the second highest remittance outflow from India, at 27 per cent of the total.

This is mainly on account of historical ties and consequent migration flows. General patterns of outward remittance and migration follows a parallel trend. A World Bank report, Remittance Market in India, 2012, by Gabi G Afram, refers to a 2008 study by an A Kumar. It had stated that estimates of irregular migration from Bangladesh to India range from five million to 20 million. Most of these migrants work as unskilled or semiskilled labourers and domestic servants. The report says India is an important destination country for migrants from Bangladesh, Nepal and Pakistan and Sri Lanka. Migration from Bangladesh, Nepal and Lanka is mainly of unskilled and semiskilled workers, the study says. Why Bangladesh leads in remittance outflow from India Interestingly, World Bank data shows that 90 per cent of outward remittances of India are to the countries with highest migrant population, viz, Bangladesh, Pakistan and Nepal. Another report by the International Labour Organization quotes a study by P Wickramasekara in 2011, which says migrant movements within South Asia are primarily geared towards India and Pakistan. “Although these are largely undocumented, the United Nations Population Division estimates India hosts some six million migrants (mainly from Nepal and Bangladesh)," it says. Business ties with Bangladesh Over the past six-odd years, a number of Indian companies have started operations in Bangladesh. Notably, the definition of outward remittance by the World Bank is wide, including those by workers, compensation of employees and migrants’ transfers. Thus, remuneration of Bangladeshi employees by Indian companies in Bangladesh is counted as remittance. “In recent years, there have been a number of acquisitions by Indian companies in Bangladesh. This apart, there have been a number of joint ventures and alliances by Indian companies; many Indian companies have also opened subsidiaries in Bangladesh,” notes Ambarish Dasgupta, head of management consulting and eastern region at KPMG in India.

Between 2011 and 2014, foreign direct investment outflow from India to Bangladesh increased 161%, from $26 mn to $68 mn, says KPMG. Some of the major investments proposals from Indian companies include Reliance Power's $3 billion plan to set up a 3,000 Mw power unit, based on imported liquefied natural gas there, and Gujarat-based Adani Group plan to invest $2.5 bn in building a 1,600 Mw coal-fired power plant in Bangladesh. The government there has also offered to establish two Special Economic Zones for Indian companies, beside allowing Life Insurance Corporation to start operations, says KPMG.

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First Published: Fri, January 08 2016. 00:35 IST
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