How much do NRIs contribute to the Indian economy?

Mr. Ramamurthy posted the following comment a few days ago:

Do you have the breakup of invisible imports? I presume it includes remittances made by Indians working abroad who send money to India? I think you did a post showing this? I cant access this?

I think he meant invisible exports, and this is a simple question, the answer to which is slightly complicated because of the way you have to get to the numbers.

Let’s quickly address what “invisibles” mean before looking at the numbers. Invisibles are that part of trade where no physical goods are exported or imported.

So, IT Services are one example, and remittances by NRIs are another.

To get to these numbers you have to look at the BoP (You can read more about this in my detailed post on Balance of Payments) data that RBI releases every quarter.

I got hold of the April – December 2012 provisional numbers, and from that I see that personal transfers which are defined as current transfers between residents and non – residents households constitute $48.5 billion for that time frame. It is hard to understand what this number means without viewing it in the right context.

The context in this case is how do these transfers compare to India’s overall exports?

Let’s start with services exports. The services exports for that nine month period was $105.8 billion which means that remittances were the size of about 46% of total services exports.

Telecom and IT services are the biggest services exports from India, and in that period those amounted to $49.6 billion so at $48.5 billion, remittances are almost as big as IT exports.

The next step is to see how these compare to overall exports, and for that we have to consider our goods exports. For that period, the goods exports were $218.3 billion, so remittances were about 22% of that amount.

So, by any measure, these are significant contributions, and you can see this by visualizing India’s current account receipts which is nothing but the income India earned from abroad for that quarter.

This is broken up into four heads (figures in Millions USD:

Goods 218,382
Services 105,840
Primary Income 7,636
Secondary Income (Remittances are 96% of this) 50,864
Total 382,721

 

 

How much do NRIs contribute to Indian Economy

As the chart above shows secondary income (which is mainly transfers) form about 13% of India’s current account earnings, and while significant, this is still a lot less than total goods exports, of which petroleum products form the major chunk, but that’s a post for another time.

6 thoughts on “How much do NRIs contribute to the Indian economy?”

  1. Manshu: Thanks for presenting this data with analysis! It is indeed an eye-opener for me. Never thought the Inward remittances were as large as IT Services export. So, in a sense all the brain-drain (and the brawn-drain) is not without some side-benefits for India!

    1. Yes, definitely, and another angle to this is where is the money coming from, which countries and what type of jobs are people doing there because for some of these remittances and the jobs that people do for them, they don’t really have all those opportunities in India.

  2. Very informative post, quality content.
    Keep it up.

    Also I just came to know about a capital gains accounts scheme
    in which you are put all you profits from sale of property etc which come under capital gains tax,
    into a capital gains bank account, this doesn’t attract any tax and there’s a lock in of 3 years.
    Maybe you do a small post on the same

  3. Thank you.Thanks for correcting me.
    I am thrilled to know we export Petroleum products.Good to see you will be doing the post on this.If I may suggest, can you touch in your proposed post the following points:
    1.Do we export crude or refined petroleum ?
    2.Who are the major exporters?
    3.Why should any country import petrol from India who themselves import lots of it.
    4. I know Reliance has a very high refining capacity.I dont know whether they have any surplus left for exports.

Leave a Reply to ramamurthy Cancel reply

Your email address will not be published. Required fields are marked *