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Remittances
Context:
According to data from the Reserve Bank of India (RBI), outward foreign exchange remittances by resident Indians dropped by 43.93% to $2.181 billion in June 2024, compared to $3.890 billion in the same month last year.
More on News:
- Outflows under the RBI’s Liberalised Remittances Scheme (LRS) decreased by 24.47% to $6.88 billion in the first quarter ending June 2024, down from $9.11 billion in the same period the previous year.
- Travel has become the largest component of remittance outflows from India, now representing over 50% of total outflows, a significant increase from just 1.5% in FY14.
- Under the Liberalised Remittance Scheme (LRS), all resident individuals, including minors, can remit up to $250,000 (approximately Rs 2.09 crore) abroad annually without prior approval from the RBI.
- The LRS limit, originally set at $75,000 in 2014, has been gradually increased to its current level.
- The Scheme was introduced on February 4, 2004.
- Remittances can be made in any foreign currency that is freely convertible.
- Prohibited items under the Scheme:
- Remittance for trading in foreign exchange abroad.
- Remittance for any purpose specifically prohibited under Schedule-I (like purchase of lottery tickets/sweep stakes, proscribed magazines, etc.)
Remittances:
Remittances are funds that are sent from one person to another, typically across international borders. They often involve sending money from individuals working or living abroad back to their home countries or families.
Advantages of Remittances:
- Economic Growth: Remittances can contribute to economic growth in recipient countries by increasing household income, stimulating consumption, and supporting investment.
- Poverty Reduction: Remittances can help reduce poverty by providing financial support to families and individuals in need.
- Education and Healthcare: Remittances can be used to fund education and healthcare expenses, improving the quality of life for families.
- Investment: Remittances can be invested in businesses, real estate, or other assets, contributing to economic development.
- Foreign Exchange: Remittances can be a significant source of foreign exchange for recipient countries, helping to stabilise their economies.
- India’s foreign assets increased more than liabilities in 2023-24, according to RBI data.
- Social and Cultural Benefits: Remittances can strengthen family ties and cultural connections between migrants and their home countries.