The surging international crude oil prices are projected to fuel inward remittances to India this year topping the $69 billion of net remittances clocked during 2017 calendar.
“There is a direct link between crude oil prices and remittances to India. The current spate of high crude oil prices would certainly boost inward remittances given the large number of Indian migrants working in the oil-rich Gulf nations,” global money transfer company MoneyGram head (India & Subcontinent) Sheshagiri Malliah told Business Standard here on Tuesday.
Remittances to India stood at $72 billion in 2014, when the crude oil prices were ruling high above $100 dollars a barrel, however, the remittances fell to $64 billion and $62 billion in 2015 and 2016 respectively when oil prices subsided following demand squeeze and robust production.
“The World Bank has already projected the remittances to India to rise by 4-5 per cent this year, which would peg the remittances to $72-73 billion,” he added.
Currently, the oil prices have been ruling firm following output cuts by oil cartel Organisation of Petroleum Exporting Countries (OPEC) and other geopolitical factors, including looming US sanctions against Iran coupled with strong market demand.
Currently, oil prices hover around $71 dollars per barrel with analysts forecasting it to reach $80 dollars, and some even talking about the risk of the oil prices hitting $100 dollars per barrel next year for the first time since 2014. Similarly, the gradual fall in the Rupee value has positively impacted remittances to India.
Indians count among the largest working diaspora in foreign countries at about 16 million, of which 67 per cent hail from rural background.
Meanwhile, MoneyGram has announced a strategic partnership with cash payout company Weizmann Forex Limited, which would allow the former to expand its footprint in key remittance geographies across India. Weizmann has about 5,400 payment outlets in Uttar Pradesh, which accounts for about 30 per cent of the Indian diaspora working offshore, especially in the construction and infrastructure sector in the Gulf.
In recent years, UP, Bihar and Haryana have moved up the chart in terms of their people migrating outside for work vis-a-vis the traditional source states of Kerala, Tamil Nadu and Punjab. Over the last 2 years, there has been a 24 per cent increase in migration from India for work, especially with oil economy doing good, Weizmann managing director Karthikeyan Balasubramanian said.
United Arab Emirates (UAE), USA and Saudi Arabia are the top three source countries for India remittances. Currently, remittances account for 3.3 per cent of India’s Gross Domestic Product (GDP). In Kerala, remittances contribute significantly to the local economy and pegged is at almost 36 per cent.