Diaspora and development has swung back and forth like a pendulum. India has the largest Diaspora population with, 18 million people living outside their homeland in 2020. With one of the largest pools of low-waged, semiskilled, and unskilled labor India is a critical source of labor.
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International migration is an ever-growing phenomenon that causes development for both sending and receiving countries. When a nation sends migrants, it brings remittances that lead to increased incomes. It also helps in poverty reduction, improved health and educational outcomes, and upholds economic development.
Migration impacts the welfare of households, the home community, and the whole economy as well.
Although the increased level of the Diaspora is and will be resisted in the coming decades by the industrialized countries, it will be strongly supported by the firms since this lowers their labor cost and provides them with complementary skills.
Now the concern is, can diaspora become a strategic asset instead of just depleting the best and the brightest? Should a country become a “remittance-based economy”?
Diaspora and the social impact.
An optimistic view
Migration causes household welfare
Migration can be a rewarding experience made in the interest of the household welfare. But in most cases moving to another country and separated from one’s immediate family takes place at a considerable emotional cost. The emotional impact is not just limited to the migrants themselves but also the family left behind.
Remittance benefits the home Country
Remittance has an income-stabilizing effect at both the macroeconomic level and at the household level. During economic downturns and financial stagnation, the amount of remittance is more. Migrant remittances increase domestic savings as well as improve growth prospects.
The Diaspora serves as a link between the sending and receiving communities.It creates opportunities to access international financing. The Diaspora also contributes through philanthropic remittances and the development of their former communities by subsidizing activities.
Greater access to knowledge and skill
Diaspora leads to greater access to knowledge and skills that could further bring technological advancement to the origin country. Emigrants are a chief supply of foreign investment. Conversely, Indians in the UK were modestly successful, and therefore despite the nation’s salience, the performance was well.
Migration contributes to human capital formation.
Re-allocation of labor from rural, agricultural areas to urban, industrial sectors is considered a prerequisite for economic growth. There is growing evidence suggesting that the income from remittances dis-proportionally spent on education and health rather than everyday consumption. Once in school, the children of migrants may be more likely to finish their education, as the increased income from remittances provides additional financial resources.
A pessimistic view
Political instability leading to migration
Migration from India is generally driven by economic events, although political factors have been significant in specific cases. Where migration, generated by political strands, the consequences are ruinous to the country of origin. The role of diasporas from Kashmir, Punjab, and the northeast at various times is an example in this regard.
High-skilled emigration or the brain drain can imply a loss of public resources invested in the education of the budding youths. The emigration of the highly skilled can be significant in the education and health sectors in small countries that face severe shortages of health workers.
Inconclusive effect on welfare
The effect of the remittance inflows and outflows on our Indian economy is inconclusive. Empirical studies have found that there is a minute positive impact of remittances on economic growth. There is evidence of increased human trafficking, fraud employers. It has significantly affected the migration decision of many people.
Incoming migrants need to get integrated into the labor force, which intensifies the competition for existing jobs. A common worry is also downward pressure on salaries caused by an influx of migrant workers.
Diaspora concerning Indian Population
The prevailing wisdom in India until 2000 paid little attention to international trade. India’s fears towards the outside world reflect its international trade policy and FDI, an apathy bordering on resentment towards its more successful Diaspora.
Policy changes in India and global trends portend a potentially colossal increase in international migration in India. The country and its Diaspora are at their historical pivot. There is a significant potential for the Diaspora to emerge as a chief strategic asset for India in the future. India’s large Diaspora distributed across the United Arab Emirates (3.5 million), the United States of America (2.7 million), and Saudi Arabia (2.5 million).
Indian migrants are commonly found, in Australia, Canada, Kuwait, Oman, Pakistan, Qatar, and the United Kingdom. India experienced immense gain during that period at 10 million. The US leads as the destination of international migrants, 51 million migrants in 2020, equal to 18 percent of the nation’s total.
Table 1: Total Indian Diaspora
Note: The numbers are estimates of the diaspora populations including both actual migrants and descendants of migrants. For Nepal, data refer only to persons born in India.
Source: High-Level Committee on the Indian Diaspora (2002). Sri Lanka and Nepal: 2001 Census.
The above table shows us the figures of Diasporic movement from India to the different GCC countries, among which Myanmar, Gulf countries, USA and Malaysia show a significantly high rate. These places are the peak spots for migration because of the developed institutions, property rights, technological advancement, higher employment opportunities, and high wages than the home country.
Effect of diaspora on employment
A national unemployment rate of 3.4 percent recorded in 2017-18. An ILO study shows that low-skilled migrant workers earning approximately 1.5–3 times more in wages in the destination. In such a scenario, emigration for work with a formal contract and better wages are significant driving motivations to leave.
ECR flows might be a small proportion of the total labor force in India (estimated at nearly 485 million) compared to the annual addition to the labor force in the past two decades. The labor outflow figures are significant and, foreign employment destinations have acted as a crucial safety valve for the Indian labor market.
Chart 1: ECR migrations from India
Source: MCE data 2011-2017
Chart 1 shows a sharp fall of 5-6% in the migration to ECR countries in the last 5 to 6 years.. The outflow of Indian workers to Gulf nations peaked at 7.76 lakhs in2013- 2014; however, the decline in 2018 is as high as 62%. Reports reveal that there have been instances of non-payment to workers by dodgy employers.
Migration helping in human capital formation
Migration increases health knowledge and the direct effect on wealth, which has led to lower rates of infant mortality and higher birth rates in Mexico. Migrants introduce health-improving practices such as drinking safe water and better sanitation. Migration poses a threat to migrant health as jobs expose migrants to occupational hazards, such as tuberculosis, pneumoconiosis, and workplace injury by mine workers. The descendants of migrants are more likely to complete their education abroad.
Table 2.1 : Stock of Indian migrants in select GCC countries, by sex (1990)
|Countries||Male||Female||Total||Total migrant stock|
|Behrain||46 340||14 165||60 505||173 212|
|Kuwait||257 851||117 332||375 183||1 074 391|
|Oman||130 597||21 957||152 554||304 000|
|Qatar||1 998||740||2 738||309 753|
|Saudi Arabia||612 071||294 397||906 468||4 998 445|
|UAE||353 659||104 635||458 294||1 306 574|
The table 2.1 and 2.2 provides us the complete image of how the diaspora has gradually expanded over all these years. The figure has expanded both for male and female populations to the GCC countries among which UAE and Saudi Arabia show impressive figures.
Table 2.2 : Stock of Indian migrants in select GCC countries, by sex (2015)
|Countries||Male||Female||Total||Total migrant stock|
|Behrain||228 273||74 362||302 635||704 137|
|Kuwait||748 549||313 209||1 061 758||2 866 136|
|Oman||671 881||105 751||777 632||1 844 978|
|Qatar||556 448||89 129||645 577||1 687 640|
|Saudi Arabia||1 308 558||585 822||1 894 380||10 185 945|
|UAE||2 710 332||789 005||3 499 337||8 095 126|
Note: Figures in brackets in the total column indicate the proportion of Indians in the total migrant stock in the respective countries Figures in the grey row show the total proportion in the entire diasporic stream in the given year.
Impact of remittance and diaspora on the Indian economy.
The contribution of the migrant worker has led to India becoming the top recipient of remittances in the world, with over US$ 62.7 billion received in 2016. FDI inflows this year in India were at US$ 46.4 billion, underscoring the importance of remittance flows into the Indian economy. GCC makes up 52% of remittances received in India. The cyclical decline would have substantially pronounced for India in 2016.
Chart 2: total remittance to India in different years as % share of GDP
Source: the world bank
Line figure analysis
Chart 2 shows us how the remittance has gradually increased all the year as a percentage share of GDP. According to RBI reports, remittance in India reached US$46.4 billion for the fiscal year 2008-09 from a value of US$2.1 billion in 1990-91. However, the 34% growth rate of 2008 started to decline in the last quarter of 2008 due to the global financial crisis. The rate picked up again, registering a 4-5% rate in the second and third quarters of 2009.
There was a 9% decline in remittances to India in 2016 and, this resulted from a host of cyclical factors like the global economic slowdown, especially in the GCC countries. The weakening of the euro and the pound versus the dollar was responsible for a sharper decline in remittances.
Table 3: data on % share
Table 3 presents the percentage figures of remittance inflows as a share of selected financial flows and GDP. It demonstrates the extent to which the influence of remittance on a country’s foreign exchange reserves.
Remittances have become a stable source of the Indian balance sheet. When economic conditions are favorable in the host country the remittance flows become higher. Thus it acts as a buffer to our economic system in times of need.
Remittance is a significant source of capital in our country. It makes up a large chunk of India’s GDP – 3.3% in 2007, according to the reports of the world bank versus the 0.7% share in 1990-91. In the last few decades, most migrants were professionals who drove such a sharp increase in remittance. Most of the remittances received during 1997 and 2004 came from United States, Canada, and Europe.
More than half of the funds received during 2003 and 2004 originated from North America alone. There has also been mammoth growth of capital inflow. India has a population size of more than 1 billion, an active labor force of more than 467 million, and GNI per capita at US$1070. Thus, emigration to a developed country is an important and attractive source for many workers. Remittances have surpassed both foreign aid flows, foreign direct investment (FDI) flows.
The above has made this quite clear that diaspora can serve a developing nation as a significant strategic set. It can act as a buffer that can help in stabilizing the growth process of an economy. It also helps in poverty reduction to a great deal. So it is not a mere brain drain to the economy. The increased flow of remittance has helped the developing nation a lot, it has a stronger impact than FDI flows in the last ten years.
But, can we depend on remittance and develop a remittance-based economy where remittances become increasingly critical for maintaining socioeconomic stability in the migrant-sending country?
Migration and remittances can be a valuable complementary asset to our broad-based development efforts .Yet, migration and remittance cannot be a substitute for official development aid. They are private money that cannot fund public projects. Poor households do not receive remittances. Official funds are in need to aid these households. They can also foster a dependency on outside capital flows. Remittance flows can reduce due to a global economic downturn. So, it’s not rational to depend on such uncertain assets for our core economic development. Hence, the development of a remittance-based economy is not feasible.