Migration and India

Paralleling the growth of India’s economy has been the concomitant increase in India’s global engagement. While this has been most manifest in the growth of trade and financial flows, the movement of people has also become more important. Since the 1830s, international migration from India under British rule comprised largely of unskilled workers from poorer socio-economic groups who went to other colonised countries. Between 1834 and 1937, nearly 30 million people left India and nearly four-fifths returned. Post-Independence, migrants came from richer socio-economic groups, from wealthier parts of the country and, with the exception of the large migration to the Middle East, went to industrialised

The migrant stream to the United States in particular has been the most highly educated, both compared to other immigrants into the US, as well as to other Indian migrant streams abroad. Since the 1990s, increasing numbers of skilled emigrants from India have also been moving to Australia, Canada, New Zealand and Singapore.

The economic impact of international migration on India has been primarily shaped by two key channels — financial and human capital. The oil boom-induced Gulf migration in the early 1970s is when efforts at attracting inflows from Non-Resident Indians (NRIs) began. Since then financial remittance has emerged as an important part of India’s balance of payments. Remittances were virtually negligible in 1970, rose to $2.8 billion in 1980, stagnated during the 1980s and even dropped slightly to $2.4 billion in 1990. Since then they have climbed steeply to $11.1 billion in 1999 and over $50 billion — nearly 5 percent of GDP — in 2009.

Paralleling the inflows of remittances have been NRI inflows in the capital account. Although schemes to attract the latter were introduced in 1970, a decade later deposits barely exceeded one billion dollars. During the 1980s, while remittances languished, deposits accelerated. Following the onset of the 1991 reforms NRI deposits grew rapidly accounting for nearly 10 percent ($37 billion) of the accretion to India’s foreign exchange reserves in the last two decades.

This spurt has in part been due to the rapid growth in the stock of India citizens residing abroad, the degree to which their earning power has increased and policy changes including liberalisation of the foreign exchange regime and gold imports (with the latter resulting in bringing remittances from the Middle East through official channels, rather than hawala
markets), and of course India’s much better growth prospects.

In contrast to the large inflows in the current account and banking deposits in the capital account, NRI-FDI has been remarkably limited in part because of an unfavourable policy regime that penalises NRIs from remitting the gains from FDI.

In addition to the obvious positive impact for recipient households, financial remittances have had considerable systemic effects on India’s balance of payments, allowing much greater trade deficits than would otherwise have been possible, stabilising the rupee exchange rate and thereby giving India’s central bank greater monetary policy autonomy.

These inflows have been much more important for some states than others. The most obvious case is Kerala where remittances account for about a quarter of state net domestic product with wide ranging economic and social consequences. Given Kerala’s political economy, it is not surprising that most of this money fuelled a consumption boom (with no investments in manufacturing) and the resulting demand has driven growth in the service sector, most of which (such as construction) are non-tradeables. Recently however, these inflows have fuelled investments in the hospitality industry and a mushrooming of private institutions in health care and education.

A second channel through which international migration has affected India is its human capital. The effects of skilled migration have been ambiguous. On the positive side, the success of India migrants overseas has been good for India’s reputation. In addition, this segment of the diaspora has woven a web of cross-national networks, thereby facilitating the flow of tacit information, commercial and business ideas, and technologies into India. It has also facilitated “home sourcing”, as exemplified by the rapid growth of India’s diamond cutting and polishing industry. The Indian diaspora has also had important trade enhancing and investment effects.

Source:http://www.moneycontrol.com/news/features/migrationindia_480537.html