Policies may be tweaked to boost remittances

NEW DELHI: The government may consider a revision in policies to increase the flow of remittances in the country to reduce dependence on overseas development assistance (ODA) and foreign direct investment (FDI).

“Though our position on the external account is good, in the course of finalising the Eleventh Plan if we find some areas to further improve remittances, we will look into it,” Planning Commission deputy chairman Montek Singh Ahluwalia said releasing a Saarc report on poverty reduction in south Asia through productive employment.

He, however, clarified that remittances would not be promoted at the cost of FDI and both would be encouraged through more liberal policies. The focus on remittances has come in the wake of the Saarc report which suggested that compared to FDI, remittances play a greater role in promoting development and poverty reduction and helping build prosperity of the destination countries.

As per the report, a 10% increase in the share of remittances in the country’s GDP leads to a 1.2% decline in the share of people living on less than $1 per day. This is significant in case of India as the remittances have increased to $21.7 billion in 2004 even as the country is struggling to increase its annual FDI inflows. The remittances to India constitutes 9.61% of total remittances globally and is one of the highest worldwide.

Emigration from India of semi-skilled for employment during the last five years (2000-04) has increased from 2.43 lakh to 4.75 lakh annually. The UAE and Saudi Arabia accounts for close to 50% of the total migrants. The Middle-Eastern countries accounted for 96% of the total semi-skilled and unskilled migrant workers from the country in 2004, as per the report.

However, the situation is not too comfortable for permanent migration of professional workforce to industrialised countries. The report pointed out that migration to industrialised countries was insignificant and constituted less than half a percent of the educated workforce in 1970s. It has continuously declined since due to severe limitations placed by industrialised countries.