Economic Impact of Out-Migration from South Asia

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Ms. Ipsita Ray


Background:Labour migration has become a common phenomenon in globalised world. Almost all migrant workers send a portion of their earnings back home. This became a good source of foreign exchange for the home country. Therefore, most governments of South- Asian region promotes out-migration. Thus, it becomes essential to study the impact of migration on economies.The impact of external migration can be analysed on the basis of multiple factors. Available literature suggest, migration is beneficial to labour receiving country as well as labour sending country. Receiving countries encourage labour in flow to reduce shortage in workforce and skill level. On the other hand, incoming labour class retain their attachment with country of origin with a hope to eventually return home. Similarly, labour sending countries welcome remittance as a way to receive foreign exchange. Remittances are often a means to reduce balance of payment deficit.

Remittance through multiplier effect, contributes to the macro-economy of the sending country. The sending nation at macro level is influenced in terms of GDP, Job market, inflation and balance of payment. Remittance sent by migrants, act as an important source for growth in developing nation. There are research studies conducted on use of remittance for long term development. At the same time, a close study at micro level reflects increased demands of consumerism in the family of migrants. Significant changes in terms of expenditure can also be noticed on health care, education and living conditions.  In addition to economic well-being, migrants and family members also enjoy higher social status.

Objectives: The primary aim of the paper is to evaluate the relation between migration and remittance on the economies of countries of South Asia.

Methods:The methodology adopted is doctrinal in order to evaluate micro and macro level impact on South Asian Economies.  Doctrinal methodology has been adopted since there is published data available in the form of primary and secondary sources. The secondary sources include governmental websites of South Asian countries as well asreports published by international agencies such as World Bank (WB). The collected data is analysed through a descriptive approach as aim is to describe impact on migrant, dependants of migrants and thereby economy of sending country.

Results:After East Asia, South-Asia is the largest remittance receiving region in the world. (World Bank). In 2016, the region received US$ 110 billion in remittance which increase respective remittance percentage of GDP extremely high for all countries in South-Asia. For example, 31.3 per cent of GDP in Nepal, 8.9 per cent in Sri Lanka, 7.1 per cent in Pakistan and 6.1 per cent in Bangladesh. India being the fore-runner of the region did not rely only on remittance and gained 2.7 per cent of its GDP in the same year. (World Bank). It is true that remittance from North-South migration is higher than South-South migration but small increase in income leads to significant consequences for poor. Following are the few results identified in the study:

  • Migrants contribute to fill in the gaps of labour-market by contributing to the need of high and low skill labour. Emigration helps in increasing economic status of the nation by enhancing skills in migrants. Migration benefit are multi-faced like building entrepreneurship, improving market efficiency and many more (ILO 2010).

  • Many developing nations have started utilizing migration as a means for curtail unemployment issue. South-Asian region is no exception.

  • Out-migration is considered a way to reduce poverty and earn advantage of remittances. South-Asian countries are taking special measures for creation of special unit of remittance in central banks, revisiting licensing process for money transfer, liberalizing exchange rate and encouraging domestic banks to establish partnership with foreign banks where migrants have relocated in high numbers. Governments are also promoting families receiving remittance to invest in small and medium scale businesses to generate income in home countries.

  • South-Asian outward migration is dependent on networking (network theory) which results in informal remittance channels. It becomes impossible to trace informally transmitted remittance. Informal means may appear to be lucrative but is also responsible for smuggling, money laundering and other forms of financial abuse. Governments of both receiving as well as sending countries are taking steps to curb informal channels of remittances.

Conclusions: The study demonstrates a positive impact of out-migration on the economies of South- Asia. Unskilled or semi-skilled labour of the region are lacking job opportunities in home country. Migration to foreign lands in search of employment proved to be double win for sending country. On one hand, the home economies are gaining out of remittance send back and on the other hand, unemployment problem is also reduced. Moreover, migrant workers are coming back with enhanced skill-level thereby proving themselves more productive in future.But informal means of remittance transfer has become responsible for smuggling, money laundering and other forms of financial abuse. Anonymous transfer in hawala system, allow income of illegal activity to enter money market at ease.Addressing the financial risks associated with informal flow of remittances, World Bank (2003) suggested integration of informal channels with formal channels. In other words, it is almost impossible to put an end to the system because of its popularity, but it highly beneficial, if hawala brokers can be registered with central banks. In such scenario, transactions can be tracked and problems associated with the system can be avoided to a great extent.

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