Remittances buttressed India’s Balance of Payments, Can the pace Continue?

NRIs’ remittances to India have grown at 10.3% CAGR in US-dollar terms since 2001. Only one other item, software services exports, has outpaced this, at ~15% CAGR over the same period.

How big are remittances? They were about $125 bn in FY25, larger than India’s biggest merchandise export category, engineering goods (~$117 bn). In effect, India’s largest “export” is its people: they earn dollars abroad and remit them home.

Growth in remittances from the Gulf has softened; oil-linked wages aren’t compounding at 10%+. That implies roughly one-third of the remittance basket is unlikely to sustain 10% growth. To keep overall remittances growing at historical rates, flows from services-driven hubs (the US, UK, Singapore, etc.) would have to rise at 12%+ in USD terms, a tall ask requiring comparable NRI income growth.

Therefore, one of the largest and most supportive components of India’s balance of payments (BoP), remittances, may have reached a cyclical peak. If this coincides with a softening in services exports, the adjustment would likely require either a sharp import compression or a new export engine, neither of which is yet clearly in sight.