May 22, 2022

The Queens County Citizen

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How the NRI Community Supports the Indian Economy

India is a country with over 1.2 billion people, and the number of Indians living abroad has been steadily increasing in recent years. Approximately 30% of Indian citizens are residing outside India at any given time. This means that an estimated 18 million non-resident Indians are living abroad today.

Worldwide, Indian migrants send back to their home country about $70 billion each year through the process known as the Non-Resident Indian (NRI) Transfer Process. The NRI transfer process is one way for these migrants to contribute to their home country’s economy while they live overseas, but how exactly does it work?

What is the contribution of the NRI Community to India’s economy?

Non-residential Indians have contributed to India’s economy through:

1. Remittances

NRI’s contribution to India’s economy is primarily through the NRIs’ remittances which are substantial in size. The remittances have become an important source of external finance for India.

Remittance inflows improved macroeconomic conditions by supplementing local currency resources with low-cost funds that help lower interest rates on Indian government bonds.

NRIs transfer their incomes earned abroad back to their families in India through places like Western Union by means of international money transfer. This flow of funds has become an important source for augmenting the foreign exchange reserves.

2. Improved Workforce

NRIs who have a foreign degree, work in a foreign company, or have been exposed to another country’s culture, and business practices can contribute their knowledge and skills back home. This type of contribution helps boost India’s workforce productivity by allowing businesses to adopt new technologies that are used successfully elsewhere around the world.

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3. GDP Contribution

The NRI transfer process helps to improve macroeconomic conditions by supplementing local currency resources with low-cost funds that help lower interest rates on Indian government bonds. For example, in 2002, NRIs sent USD 11 billion towards India’s foreign exchange reserves which helped the rupee strengthen against the US dollar and positively affected GDP growth.

4. Foreign Reserves

NRI citizens have contributed to the foreign reserves in India in various ways. One way is through foreign direct investment (FDI). NRIs invest money into Indian companies traded on the international market, which increases their value and exports of these businesses to other countries.

NRI’s also indirectly sought employment opportunities with MNCs or multinational corporations in Western countries like Canada, Australia, New Zealand, or the United States. These companies will transfer part of their international profits made in India back to their overseas employees through these remittances.

5. Remittances

NRI remittances are used to fund liabilities under external commercial borrowing (ECB) issued by Indian companies. Indian companies take advantage of cheaper credit from overseas markets due to their NRI status. In addition, many NRIs who have a foreign bank account invest their savings in India.

Having these funds readily available allows banks to lend more. The fund helps lower interest rates for local citizens, which will stimulate the economy. This is one of many ways NRIs are helping boost India’s economic growth by providing capital inflows and financial support to companies doing business in India and those wishing to do so.

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