India could be hit as foreign remittances dry up

BANGKOK: India would be among the hardest-hit nations as the remittances sent home by its people working in the Middle East begins to dry up following the economic downturn.

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There are an estimated five million Indian migrant workers in six Gulf nations, transferring more than one-fifth of India’s total overseas remittances.

While the Ministry of Overseas Indian Affairs insisted the situation is not alarming, there are reports of job losses and wage cuts in the United Arab Emirates and Bahrain during the slump in oil prices and in the construction, real estate and tourism sectors because of the financial crisis.

“Remittances are a catalyst in India’s growth as they make up 3 percent of the country’s GDP,” a ministry official said. “A drop in the figures could act as a drag on the economy.”

The Indian consulate in Dubai has said construction firms there had bulk-booked planes next month to fly 20,000 to 30,000 workers home on long leave or to re-deploy them on projects in Gulf nations like Qatar.

An estimated $260 billion of real estate projects are reported to have been delayed or shelved in the Emirates alone. Dubai’s construction boom has crashed, sending thousands of workers back home and causing thousands of them to leave cars at the airport that they have stopped payments on.

Over the past three to four years, one of Asia’s fastest growing industries has been exporting workers, especially to the oil-driven, construction-crazed economies of the Middle East.

Remittances have become a major contributor to foreign exchange earnings and gross domestic products (GDPs), peaking at an estimated $116 billion in 2008.

This year, the money flows were expected to slow as construction projects are shelved and other jobs dry up in Gulf nations, such Abu Dhabi, Bahrain, Kuwait, Qatar, Saudi Arabia and the United Arab Emirates, which have employed up to 13 million foreign workers, 11 million of whom hailed from Asia.

The remittances have saved millions of families from impoverishment and boosted the region’s economies.

Last year, remittances to Asia amounted to $8.9 billion for Bangladesh, $27 billion for China, $30 billion for India, $6.5 billion for Indonesia, $2.2 billion for Nepal, $1.8 billion for Malaysia, $7 billion for Pakistan, $16.4 billion for the Philippines, $2.7 billion for Sri Lanka, $5.5 billion for Vietnam and $1.8 billion for Thailand, according to International Labour Organisation estimates.

The inflows accounted for 9.5 percent of Bangladesh’s GDP, 2.4 percent of India’s, 15.5 percent of Nepal’s and 11.6 percent in the Philippines, the UN agency said.

But recession and plummeting oil prices were expected to take a deep bite out of the remittance flow in 2009.

Source: Economic Times, Thanks

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