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India’s Soaring Remittances: A Lifeline for the Economy

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According to a recent RBI report, remittances to India surged to $135.46 billion in FY 2024-25, marking a 14% jump from the previous year and more than double the inflow seen in 2016-17.


Key Highlights

  • 2024-25 Remittances: $135.46 billion

  • Growth: Up from $118.23 billion in 2023-24

  • 2016-17 Baseline: $61 billion → more than 2x growth in 8 years


Economic Significance

  • Current Account Impact: Over 10% of India’s $1 trillion gross current account inflows

  • Trade Deficit Cushion: Offset nearly 47% of India’s $287 billion merchandise trade deficit

  • FDI Comparison: Remittances exceeded gross FDI, making them a stable and consistent source of external financing


UPSC Relevance

  • GS Paper 3: Indian Economy – External sector

  • Topics: Balance of Payments, Current Account, FDI vs Remittances, Sources of Capital


UPSC Prelims MCQ

Q. With reference to remittances to India, consider the following statements:

  1. Remittances contributed to more than 10% of India’s current account inflows in FY 2024-25.

  2. Remittances to India are lower than the gross FDI received in the same period.

  3. India’s merchandise trade deficit in 2024-25 was nearly twice the remittance inflow.

Which of the statements given above is/are correct?

A. 1 only

B. 1 and 2 only

C. 1 and 3 only

D. 1, 2 and 3


✅ Answer: A. 1 only

Explanation:

  • Statement 1 is correct: Remittances made up over 10% of current account inflows.

  • Statement 2 is incorrect: Remittances surpassed gross FDI.

  • Statement 3 is incorrect: Remittance inflow ($135.46B) was nearly half, not twice, the merchandise trade deficit ($287B).


UPSC Mains Question (GS Paper 3)

Remittances have become a critical pillar of India's external sector stability. Discuss their role in managing the current account deficit and supporting macroeconomic resilience. Also, highlight associated risks.


 
 
 

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