Covid-19, oil price shock may cause remittances falling 20% this year: Expert
Kerala and Punjab are two of the most important remittance recipients among Indian states, and are likely in touch the brunt of the autumn in remittance flows, Dilip Ratha, who heads the worldwide migration think factory KNOMAD, told The Sunday Express.
Rupee slips 48 paise to 76.08 against US dollar in early trade amid coronavirus scare
The fall in remittances, consistent with Ratha, will increase the fiscal difficulty of states as households will either not have the extra income through remittances or will receive lower amounts.
India is probably going to ascertain a fall of a minimum of 20 per cent in remittances from overseas workers this year, the most important projected drop since a minimum of 1980, consistent with Dilip Ratha, International Bank for Reconstruction and Development lead economist on migration and remittances.
India, the world’s top recipient of remittance transfers and a number one supplier of labour to West Asia, got $83 billion as money sent from workers abroad last year — or nearly 3 per cent of the Gross Domestic Product — significantly above the $49 billion that came into the country by way of Foreign Direct Investment in 2019.
Kerala and Punjab are two of the most important remittance recipients among Indian states, and are likely in touch the brunt of the autumn in remittance flows, while others like Gujarat, Maharashtra, Karnataka, and Tamil Nadu could even be hit, Ratha, who heads the worldwide migration think factory KNOMAD, told The Sunday Express.
“Since Kerala and Punjab are two of the most important remittance recipients, an outsized number of households in these states are likely to experience disruptions to their financial lifelines, affecting their ability to consume, afford healthcare, and education. We don’t have state-level data on remittance flows and it’s difficult to be precise. In fact, other states like Gujarat, Maharashtra, Karnataka, and Tamil Nadu even have large numbers of migrants abroad and doubtless receive large amounts of remittances,” Ratha said.
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Ripple effect likely
The dip in foreign remittances will have an immediate impact on household savings and consumption expenditure, which is probably going to feature to the Covid-linked stress on the economy, and prolong the recovery process.
World Bank data projects that flows of remittances from Europe and therefore the us are likely to be weaker than those from the six GCC (Gulf Cooperation Council) countries.
According to Fitch Ratings, the pandemic and oil price shock have driven sharp economic contractions and monetary deteriorations worldwide, including within the Gulf region. Migrant workers are likely in touch the brunt of job losses, and therefore the sectors during which they work are likely to be particularly affected. Construction pipelines are being truncated thanks to spending cuts and therefore the hospitality sector is struggling from the autumn in global tourism. Remittances to the Asia-Pacific region will drop 12 per cent within the last half of 2020 compared with an equivalent period last year, Fitch Ratings said during a report.
While oil prices have staged a partial recovery from the lows it hit in April, the impact of Covid-19 on the worldwide economy and consumer behaviors has reduced long-term world oil demand by 2.5 million barrels per day, consistent with S&P Global Platts Analytics.
Given that the GCC region is especially susceptible to falling oil revenues because the Covid-led recession gets more prolonged, job cuts are likely to impact foreigners first therein region.
The fall in remittances, consistent with Ratha, will increase the fiscal difficulty of states as households will either not have the extra income through remittances or will receive lower amounts. Therefore, he said, with consumption curtailed, there’ll be both direct and indirect impact on tax revenues of states.
