India Is Number One Recipient of Remittances

As we have noted in recent postings, a large proportion of the STEM graduates from American universities – those who majored in science, technology, engineering, or math-related fields – are from overseas, especially India and China. To the consternation of American high-tech companies that want to hire the best and brightest STEM grads – including those from overseas – a small but growing number of these talented students are returning home to seek their fortunes, driven partly by the economic downturn here and immigration hassles, but also drawn home by the attractions of the vibrant economies and expanding opportunities there. (See e.g., Study: Immigrant Entrepreneurs Leaving U.S. for Better Opportunities at Home, MurthyBlog 11.May.2011.)

From a human capital standpoint, there are compelling reasons for their home governments to welcome these well-educated returnees with open arms, and equally compelling reasons for U.S. immigration policy to make it easier for them to stay here, so the American economy can benefit from their brain power. On the other hand, the Indian and Chinese governments may want to think twice before urging too many of their superstar STEM grads to come home, because they – and other overseas Indians and Chinese – pump huge amounts of money into their home economies in the form of remittances.

India leads the world in remittances – money sent home from its own nationals who live and work overseas – according to World Bank data compiled by the Migration Policy Institute (MPI), a nonpartisan Washington think tank. (See Remittances Profile: India, Migration Policy Institute, 2011.) According to MPI, India received remittances from overseas totaling an estimated US$ 53.13 billion in 2010, an amount equivalent to four percent of its gross domestic product (GDP), 30 percent of its merchandise exports, 57 percent of India’s commercial services exports, and 143 percent of foreign direct investment in India. These remittances represent a massive 2,067 percent of the official development assistance India receives.

By comparison, China is second only to India, receiving an estimated US$ 51.30 billion in remittances last year (2010), according to MPI – an amount representing one percent of Chinese GDP, 62 percent of its foreign direct investment, four percent of its merchandise exports, and 38 percent of its commercial services exports. Compared to the net amount of official development received by China, 2010 remittances were 4,306 percent of the total.

MPI’s Remittances Profile shows that India’s annual remittance flows have grown considerably over the past 20 years, from US$ 2.38 billion in 1990, to US$ 12.88 billion in 2000, to the staggering US$ 53.13 billion total reached in 2010. According to MPI, about 27 percent of India’s remittance inflows come from North America – sent by a mere 15 percent of the Indians living overseas. Overseas Indians in Europe – 10 percent of Indian migrants – likewise account for a disproportionate share (13 percent) of the overall remittances to India. By contrast, although 72 percent of India’s overseas migrants are in Asia, they send home only 58 percent of India’s remittances, MPI reports.

Although the MPI data are not disaggregated enough to know, it nonetheless would be interesting to see how much of these remittances were sent home from Indian workers in the United States, as well as the relative contributions of temporary workers – such as H1B and L-1 visa holders – versus those who have settled permanently here. One wonders: does acquisition of foreign citizenship loosen the sense of financial responsibility to the home country? How quickly do remittances drop off as a foreign worker becomes established in an adopted country? One thing, however, is clear: Indian policymakers – like those in other countries that receive huge amounts of remittances – must carefully balance their policies to keep the overseas money flowing in, even while they strive to entice some of their best and brightest to return home.