Knowledge about Import and Export (collectively known as International Trade) is an important part of Banking Training.
Any activity which results in inflow of foreign currency (FX) is known as exports and vice versa. Our countrymen who do business or work abroad send money back to their homes. This money is known as Inward Remittances (or simply remittances). As the FX comes in, this is a form of exports (actually exports of human labour).
As a country, we run Current Account Deficit or CAD. To understand Deficit, please understand that it is the opposite of Surplus. Deficit CAD means we are always exporting lesser than we are importing. Thanks to petroleum products, where over 80% supplies come by way of imports.
The Remittances bridge this CAD Deficit in a big way and create a balance which ensures:
People of Indian Origin (PIOs) are on the top globally when it comes to sending remittances to their respective home countries. This year, in 2018 as well, Indians remain on the top. In 2018, so far, Indian expatriates have sent over USD 80 billion (or USD 8,000 cr) to the country. At an average exchange rate of Rs 70/USD, the money is translated into Rs. 5,60,000 cr. This is 2.5% of India’s current year (estimated) Gross Domestic Product (GDP). In 2016, Inward Remittances were USD 62.7 b and in 2017, this figure was USD 65.3 b. 2018 has actually seen a large jump. Some reasons are: growing oil prices which has given more revenue to the oil producing Gulf Nations.
China is at No 2 here with its overseas citizens sending USD 67 b back to China. At No 3 is Mexico with USD 34 b. At No 4 is Philippines and at No 5 is Egypt. This year, so far USD 528 b have been sent as remittances to the countries belonging to the developing world (India, China, Philippines and Egypt are part of developing world). In 2018, remittance have grown by 7.8% globally.
People from rich countries also work in developing countries. We have American, French, Swiss, Italian, British, German, Japanese and Korean companies in India. These foreign employees too send monies to their respective countries. Such remittances are known as Outward Remittances. Outward Remittances means FX moving out of India are equal to Imports.
India’s FX position would have been really pathetic in absence of these remittances.
