Interestingly, India has implemented savings programs to attract foreign currency deposits from their non-resident citizens

NEW DELHI: India has been the highest remittance recipient country in 2023, according to the World Bank’s latest migration and development brief. “The United States continues to be the largest source of remittances and India is among the top five remittance recipient countries in 2023 at $125 billion,’’ according to the brief. The countries that follow India – their remittances are less than half of what India receives - include Mexico ($67 billion), China ($50 billion), the Philippines at ($40 billion) and Egypt at $24 billion.

Interestingly, India has implemented savings programs to attract foreign currency deposits from their non-resident citizens. Such deposits are usually repatriable, yield higher interest rates than comparable international interest rates (e.g. US treasuries or term deposits in a US bank), and are tax exempt. As of September 2023, non-resident Indian deposits in India amounted to $143 billion, registering an increase of over $10 billion in one year.

A special section of the brief describes how diaspora finances can be mobilised for development and strengthening a country’s debt position. Diaspora bonds can be structured to directly tap diaspora savings held in foreign destinations.

“Many countries provide for non-resident deposits to attract diaspora savings. However, unlike diaspora bonds, such savings tend to be short-term and volatile. Future inflows of remittances can be used as collateral to lower the costs of international borrowings by developing countries.” “Due to their large size relative to other sources of foreign exchange, counter-cyclical nature and indirect contribution to public finances, remittances can also help improve a country’s sovereign ratings and its ability to repay debt,’’ according to the brief.