The Surprising Growth in Foreign Exchange Spends by Indians
Over the past decade, the increase in forex spends by Indians has far outpaced the growth in remittance of foreign exchange workers into India. This trend is highlighted by the fact that money spent abroad has surged nearly 29 times – from $1.1 billion in FY14 to an impressive $31.7 billion in FY24, mainly driven by travel expenses. In contrast, the amount sent home by foreign workers has increased by 71% from $70 billion to $120 billion during the same period.
Notably, India remains the highest recipient of foreign remittances, receiving almost twice the amount compared to Mexico at $66 billion.
According to a recent study by the Bank of Baroda, the money flowing into India has displayed a Compound Annual Growth Rate (CAGR) of 5.5% over the last decade, surpassing the global growth rate of 4%. Among the major players, only Mexico has witnessed a faster decadal CAGR of 10%, allowing it to overtake China and secure the second spot.
Aditi Gupta, an economist with BoB, stated, “From just $1.1 billion in FY14, remittance outflows escalated to $31.7 billion in FY24, reflecting a remarkable CAGR of over 40%. This significant growth can be attributed to the burgeoning middle-class, leading to higher discretionary spending and increased travel expenses. BoB predicts a continued growth trajectory for inflows in 2024.”
Looking ahead, the global growth outlook appears promising, with the US expected to maintain resilience. Robust labor markets in the US, UK, and Eurozone, marked by near-record low unemployment rates, bode well for inward remittances. Additionally, stable oil prices should aid in reviving inflows from the Gulf Cooperation Countries (GCCs), despite a slight slowdown currently observed.
When it comes to the sources of remittance inflows worldwide, the US remains the largest contributor, accounting for over 25% of total remittance inflows in 2021. GCCs follow closely at 17%, with Germany, the UK, and Russia also significantly contributing to global remittance flows.
