Around 50 per cent of remittances to India are from the Gulf Cooperation Council (GCC) member countries. There has been a notable fall in inflow from these countries as a slowing global economy and plunging oil prices affected jobs and income of workers there.
Other than India’s, the global rating agency analysed the impact of falling remittances from the GCC countries on five other Asian nations - Sri Lanka, Bangladesh, Pakistan, the Philippines and Vietnam.
Like India, the Philippines and Vietnam will also not feel much pain from the shrinkage in remittances, Moody's said.
For Vietnam, the US is the source of 57 per cent of remittances. India gets 15.9 per cent of its inflows from the US.
For India and the Philippines, the relatively diverse occupations of their workers should also provide a buffer against the slowdown in remittances, Moody’s said.
It would take a 10-30 per cent fall in remittances to outweigh a 50 per cent drop in net oil imports for most countries. Given its larger net oil import bill, India is an exception, and can thus withstand a much greater fall in remittances.
Moody’s said in India, where oil import costs exceed the value of remittances as a percentage of GDP, the net impact of lower oil prices on the current account should remain positive even if remittances fall.
In case of sovereigns that are already facing external pressures, or where growth is weakening, a slowdown in remittances will exacerbate such challenges. Sri Lanka stands out in this regard due to its large financing needs and thin foreign reserve cushion. Bangladesh and Pakistan face similar challenges to a lesser degree, Moody’s noted.