Indian worker exodus from the Gulf is a chance to wean the economy off remittances

The plunge in remittances will hurt but this is an opportunity for India to reverse its brain drain, retrain for new jobs in e-commerce and boost its infrastructure sector to create jobs, answering Modi’s call for a self-reliant India

Rupakjyoti Borah

Published: 10:30am, 1 Jun 2020

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India’s reserve bank governor recently announced that the nation’s economy is expected to contract in 2020-2021 because of the coronavirus pandemic. This is no surprise with the country facing severe economic headwinds.

On top of that, many Indians working abroad have lost their jobs, particularly in the Gulf states, which will strongly affect remittances.

India is the world’s largest source of migrant workers, and almost 8.5 million are based in the Gulf. The World Bank expects remittances to India to drop by 23 per cent, from US$83 billion last year to US$64 billion this year. While India has arranged for repatriation flights to evacuate some citizens from the Gulf, many others are still waiting.

What is the likely impact of the drop in remittances?

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First, it will put a huge strain on the exchequer when the government is already allocating additional resources to fight Covid-19. Remittances from the Gulf account for almost 55 per cent of the total to India.

Second, the strain will be more severe in states such as Kerala, which depend heavily on remittances from the Gulf and received 19 per cent of the total sent home in 2018.

And third, it will be a challenge to get these expatriate workers suitably employed after their return, when many sectors are already seeing job cuts.

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New Delhi is caught between a rock and a hard place on the economic front, like many other countries, especially those that depend on remittances.

One way for India to make the best of this situation would be to create more jobs in new and emerging sectors such as e-commerce, which is likely to see huge growth post-pandemic.

Amazon India, for example, has announced plans to hire 50,000 temporary or seasonal workers to cater for the surge in demand. This is good news for the e-commerce industry, as Indians adapt to online shopping during the lockdown.

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Meanwhile, the return of expatriate workers could benefit the nation in the long term, reversing some of the brain drain. But reskilling some of these workers will be essential. Though this will take time, it will also gel with Prime Minister Narendra Modi’s recent call for a self-reliant India .

In addition, New Delhi will need to work hard to lure companies planning to move out of China. While India has moved up to 63rd in the World Bank’s latest global Ease of Doing Business rankings, much remains to be done.

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The big challenge will be in re-employing Indian expatriate construction workers, since there are not enough jobs in this sector. New Delhi needs to provide a big boost to the infrastructure sector, which can help kick-start the economy in the post-pandemic era.

The only silver lining for India is the fall in oil prices. In the 2020 financial year, India’s total oil import bill could drop by as much as 10 per cent. And for the next financial year, it could fall to US$64 billion, from US$112 billion in the 2019 financial year.

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It is risky to depend on remittances, which are prone to fluctuations. Moreover, tensions are rising in the Gulf region over the US-Iran impasse, bringing memories of the evacuation of Indian citizens in the wake of the 1991 Gulf war.

Indeed, India must move away from relying so much on Gulf remittances. New Delhi will have to find innovative ways to tackle these challenges. Such times call for out-of-box thinking.

Dr Rupakjyoti Borah is a senior research fellow with the Japan Forum for Strategic Studies, Tokyo. His books include The Elephant and the Samurai: Why Japan Can Trust India and Act-East via the Northeast. The views expressed here are personal

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