In a recent report, the World Bank noted that India’s remittance inflows reached US$125 billion in 2023, the highest in the world and well ahead of No. 2 Mexico and No. 3 China. Annual growth was a brisk 12.4%. While this was significantly less than 2022’s 24.4%, it was to be expected. 2022’s high figure reflected the low baseline of 2021, affected by the then-raging pandemic. 2023 was the first year since 2019 that Covid-19 did not significantly disrupt global economic and financial flows. saw the highest amount of remittance inflows in the world in 2023 at USD 125 billion.
One of the factors boosting India’s inbound remittances is increasingly close economic ties with the United Arab Emirates. During Prime Minister Narendra Modi’s July 2023 visit to the UAE, the Reserve Bank of India (RBI) and its Abu Dhabi-headquartered counterpart the Central Bank of the UAE signed two MoUs. While the first established a framework to promote the use of local currencies for cross-border transactions, the other was for interlinking payment systems.
The first of the two MoUs aims to establish a Local Currency Settlement System (LCSS) to promote the use of rupee and the dirham bilaterally. It will cover all current and permitted capital account transactions. This, the RBI said, would enable exporters and importers to send invoices and pay in their respective domestic currencies, which in turn would help the development of the INR-AED foreign exchange market. It would also help promote investments and remittances between the two countries.
The second of the two MoUs links India’s Unified Payments Interface (UPI) with its UAE-counterpart Instant Payment Platform (IPP) as well their respective card switches RuPay switch and UAESWITCH. These linkages are likely to address bottlenecks for Indian expats sending money home from the UAE, such as high transaction fees.
The NPCI has been busy building up UPI’s international links with an eye on remittances. For instance, in addition to these agreements with the UAE, in March 2023, NPCI inked a deal with Singapore’s PayNow to facilitate cross-border real time money transfers. The Monetary Authority of Singapore reckons that using this payment rail would reduce the costs of remittances between the two countries by 10%.