Relevance: GS-3: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment ; Inclusive growth and issues arising from it

Key phrases: World Bank and IMF, World Bank’s Migration and Development Brief, Tech startups, SDG

Why in News?

• Recently, the World Bank and IMF said that Covid-19 proved a major setback to the already marginalised families of migrants in developing nations.
• The money sent home by migrants that was predicted to fall by 20 percent remained stable, registering a smaller decline than previously projected.
• According to the World Bank’s Migration and Development Brief, India has become the world’s largest recipient of Remittances, receiving USD 87 billion (a gain of 4.6 % from previous year) in 2021.

Issues in current remittances transfer services

1. High Population Dependence: Over a billion people are involved in the remittance economy.
   • According to UN estimates, close to 800 million people worldwide are recipients of these flows of money sent by their family members who have migrated for work.
   • Of these, over 200 million foreign workers send money home to help pay for basic needs such as food, housing, education, and healthcare.
2. Costly and cumbersome affairs : The remittances based international money transfers have traditionally tended to be cost inefficient.
   • Cash-based transfer services charge phenomenal sums as transfer charges.
   • On average, globally, currency conversions and fees amount to a charge as high as 6.3 per cent of the total amounts sent.
3. High hidden charges: Migrant workers risk losing more of their hard-earned money, while economically vulnerable families, with little or no access to banks or transfer agencies are continually excluded in more ways than one.
4. Digital Startups as a panacea:
   • The panacea has come in the form of tech startups that are enabling bank-free, digital transfers of foreign funds that tend to be cost-effective, fast and transparent.
   • These digital remittance solutions are proving to be a real succour to millions of immigrant workers.
   • Digital transmissions are particularly beneficial to emerging economies, where digital growth has received a fillip following the pandemic.

Key Suggestions - A digital shift in the remittances landscape has potential for rapid financial inclusion and inclusive growth

1. Comprehensive Human Development: remittance money becomes easily accessible and the transaction cost is affordable--families can start looking beyond survival, into saving and investing in asset building or income-generating activities.
2. Digitalisation to Financial Inclusion: Addresses the question of limited access to remittance services in sending and receiving countries.
   • The post-Covid digital push in emerging economies is enabling regulatory innovation that encourages positive change in the payment ecosystem, creating the conditions for digital payments to take-off.
   • The uptake of these new forms of remittances holds the potential to bridge important gaps in digital financial services that many marginalized families who survive on remittances now face.
3. Remittances as an Insurance: Money sent by migrant workers are often a major part of their families’ total income and, as such, represents a lifeline for them.
   • Often suffering acute medical emergencies’ or crop failures in rural areas, the families’ survival hinges on every penny they received.
4. Helpful in SDG achievement: According to the UN, remittances can help achieve at least seven of the 17 Sustainable Development Agenda goals and are three times more important than international aid.

Conclusion

• All in all, the benefits offered by fast, easy means of remittance, at low costs go far beyond offering mere convenience.
  1. Transparent, cheap, digital channels are proving truly inclusive in ensuring that the benefits of remittance fully reach the hitherto financially overlooked and underserved segments.
  2. Given the manifold benefits of easy remittance solutions, it is no wonder that there is a serious rethink on global banking systems to enable them to serve individual needs.
• However, with enabling regulatory frameworks, improved mobile technological solutions, and digitalization, fast, cheap and easy remittance solutions will soon become the standard — and have an even larger potential to fundamentally impact developing economies in a positive manner.

Mains Question

Q. Remittances provide an opportunity for the economy for inclusive growth and balanced regional development. Discuss the statement and mention underlying hurdles in the development of remittances based economy.( 15 marks)

Source: The Hindu BL