International ReportsImportant2024-12-18

World Bank Remittance Flows Report 2024 Release

In News

What Happened

On December 18, 2024, the World Bank released its latest report on remittance flows to low- and middle-income countries. The report confirmed that India remains the world's top recipient of remittances, with an estimated $129 billion in inflows for 2024. India significantly outpaced other major recipients, including Mexico, China, and the Philippines.

Why It Matters

Remittances are a critical component of India's macroeconomy, helping to finance the Current Account Deficit (CAD) and stabilize foreign exchange reserves. They have now become India's largest source of external finance, far exceeding Foreign Direct Investment (FDI).

Background

History & Context

The World Bank monitors global migration and financial transfers through its bi-annual Migration and Development Briefs. Historically, blue-collar Indian migrants in the Gulf region were the primary drivers of these flows. In recent years, a demographic shift toward highly skilled white-collar professionals in Western nations has fundamentally changed the geography and volume of remittances to India.

What Changed

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Total Inflow Volume: BEFORE India recorded approximately $125 billion in inward remittances in 2023. NOW the inflows are estimated to hit a record $129 billion in 2024, reflecting a 3.2% year-on-year growth.
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Primary Source Geography: BEFORE the Gulf Cooperation Council (GCC) countries traditionally dominated as the largest source of Indian remittances. NOW advanced economies have overtaken them, with the United States alone accounting for nearly 28% of total inflows.
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Dominance over FDI: BEFORE Foreign Direct Investment (FDI) was a highly competitive or dominant source of external financing. NOW remittances vastly outpace FDI globally; the World Bank notes that over the past decade, remittances grew by 57% while FDI fell by 41%.

Prelims Angle

NCERT Connection

This connects to Class 12 Macroeconomics Chapter 6 (Open Economy Macroeconomics). Remittances are classified as 'Current Transfers' (unilateral transfers) within the Current Account of the Balance of Payments (BoP). Strong remittance inflows directly offset the trade deficit and reduce the overall Current Account Deficit (CAD) without creating debt obligations.

Practice Questions

Q1

With Reference To

With reference to the World Bank's 2024 data on global remittance flows, consider the following statements: 1. India is the world's top remittance recipient, followed immediately by China and then Mexico. 2. Over the past decade, global remittance flows to low- and middle-income countries have significantly outpaced Foreign Direct Investment (FDI). Which of the statements given above is/are correct?

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