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Diaspora sends more money than before
GAYATRI NAYAK

TIMES NEWS NETWORK[ FRIDAY, APRIL 13, 2007 02:57:17 AM]

The money sent to relatives back home by the Indian Diaspora has touched a new high. While this has been an ongoing trend, remittances have crossed a new landmark by becoming the single largest contributor to net forex inflows in the country. A notable aspect, of late, is that increasingly relatives are using substantial funds for investments rather than spending on their daily needs.

Remittances by overseas Indians, as reflected in private transfers in the balance of payments, have touched a new high of $8,145 million during the quarter ended December 2006. This is the highest-ever received by the country in any single quarter. Remittances for the entire calendar year 2006 touched $26.9 billion.

A decade ago, this was what remittances in an entire year amounted to. The quarter has ended with a record of some sort with remittances ending up even higher than foreign direct investments during the quarter as pure FDI during the quarter amounted to $8,092 million.

What has contributed to the rise is a change in the pattern of migration. Bankers say that while in the past those migrating to the West, moved for the good, the present crop of workers going overseas is keen to return. In the past, it was only the Gulf workers who were the major remitters.

Besides, there has also been a substantial improvement in the formal channels of funds transfer. While the banking channels account for bulk of the inward remittances to India, the two schemes; that is money transfer service scheme (MTSS) and rupee drawing arrangements (RDA) are also assuming significance.

These schemes provide benefits of easier and speedier operations and play an important role in expanding the outreach of remittance services to remote locations in the country.

However, the money sent as remittances is not entirely used for family maintenance and up keep. Relatives of Indians are increasingly deploying the proceeds of the remittances in various lucrative avenues such as property and other financial instruments like bank deposits and shares. With asset prices offering attractive returns both in the financial markets and the real estate markets, it is believed that many NRIs are using the remittance route through their relatives to invest in the Indian markets and
maximise their returns.

According to a study on remittances conducted by RBI reveals that 46% of the remittances is invested in instruments such as bank deposits, real estate and shares. Of this, 20% is in bank deposits, 13% in real estate and shares and the balance 13% is invested in other instruments. India received $26.9 billion during the calendar year 2006 as remittances. Extrapolating from the figures arrived at RBI, families of the Diaspora have invested around $12.4 billion in various instruments.

Of this, $5.4 billion is invested in bank deposits and $3.5 billion each in shares, land, property and other investments. India has been the largest recipient of remittances so far since 2001. Even China ranks lower than India, with Mexico occupying the third spot.
http://economictimes.indiatimes.com/Dia ... 900839.cms

In both cases,India and Latin America, there's a distinct whooshing sound.