NRI remittances touched the magic figure of USD 24.1 billion in 2005-2006, making India the largest recipient of personal money transfers in the world. Remittances and flow of funds from migrant workers to India is a key resource in its emerging economy. Remittances from NRIs and the deposits maintained by them form a generous component (about 23%) of our external reserves. A working report by the RBI on the cost of NRI remittances in May 2006 found that money flows are determined by the economic health in the host country.
The dollars poured in from the Middle East workers in the 1980s, but the source of remittances has now shifted to the West, mainly the USA. This shift in source, says the study, has also meant that growth potential for remittance flows has now moved to traditionally high cost economies which will affect cost of NRI remittances. Currently, the Middle East contributes to 35% of total inward remittances, followed by 30 to 35% from North America, 20% from Europe, and 10% from other regions. The global remittance market is estimated at $110 billion, including India-bound remittances of almost $11 billion.