How much do NRIs contribute to the Indian economy?

by Manshu on April 29, 2013

in 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.

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