Both macro and micro economic factors played into the Indian inflow of remittances, say experts Image Credit: Supplied

In 2022, remittances to India hit a record high, with the World Bank’s Migration and Development Brief putting the number at $100 billion (Dh367 billion). A large chunk of this currency came from the GCC countries, helped along by the countries’ curb of inflation, demand for workers, and the rupee’s depreciation against the US dollar.

The GCC countries’ economic situation, which accounts for 30 per cent of India’s remittances, therefore worked to India’s advantage, says Rashed A. Al Ansari, CEO of Al Ansari Exchange, which has been in service for over 50 years.

In a normal year, remittances to India are forecast to rise by 4 per cent — this level was surpassed by more than double last year, he adds. “India is among the largest recipients of cross-border remittances, with projections revealing that its remittance flows will have climbed to a record-breaking $100 billion in 2022 from $89.4 billion in 2021, growing at 12 per cent compared to 7.5 per cent,” says Al Ansari.

Both macro and micro economic factors played into the Indian inflow. Adeeb Ahamed, Managing Director, LuLu Financial Holdings, explains: “In the year 2022, Indian rupee had weakened more than 11 per cent against the US dollar amid continuously rising interest rate scenario and hawkish stance of US Federal Reserve.

“Apart from these macroeconomic factors, we are also witnessing a gradual structural shift, wherein many Indians are getting high-skilled and well-paid jobs in the region. Increase in income among Indian expats is also one of the reasons for the growth in remittances from the UAE to India.”

Digital transformation drives growth

Transfers were also helped along by the exchange houses’ foresight as they tapped the digital model of remittance. During the pandemic, overall customer behaviour in remittances shifted to digital channels from physical transactions. “Since then, we have seen a transition towards a hybrid, omnichannel approach whereby customers proactively seek choice in how they transfer money — based on convenience and needs. Non-Resident Indians (NRIs) have been no exception. India is the largest remittance recipient country in the world,” explains Hatem Sleiman, Head of Middle East, Pakistan and Afghanistan, Western Union.

Al Ansari adds that by looking at a digital solution, the companies have resolved a number of industry-related challenges. “Sending and receiving remittances, for instance, can be made much more convenient, swift, secure and affordable with these advancements. Similarly, we are seeing an increase in the use of technology in the UAE, where people are looking for reliable and fast ways to send money,” he says.

By using different payment plan models and offering competitive rates made even better by loyalty programmes, exchange houses are making remittance much easier and more accessible.

Sleiman says almost 70 per cent of the stellar firm’s NRI customer base currently transfers money directly into bank accounts in India. “Today, approximately 3.5 million NRIs live in the UAE, forming the largest expatriate community in the country. As this diaspora grows, we expect growth of the remittance corridor to follow,” he adds.

Competitive price points and exchange rates have also helped Indians grow the remittance pot. Western Union fees for money transfer from over 800 locations in the UAE, for example, start at Dh15.

In the next few years, say the experts, remittance from the UAE is expected to grow manifold thanks to the Comprehensive Economic Partnership Agreement (CEPA), signed by the UAE and India. “It has the potential to further increase bilateral trade by $100 billion over the next five years,” says Al Ansari.

“We are expecting about 12-15 per cent growth in remittances from the UAE to India in 2023,” says Ahamed.