By Muskan Mustaqeem,
India is on the verge of reaching a significant milestone this year with the support of its sizable diaspora abroad. According to the World Bank analysis released on Wednesday; Asia’s third-largest economy is expected to collect over $100 billion in annual remittances in 2022. It is a tremendous milestone that only India has achieved in the world. It is matter of joy given the increase in GDP and better living facilities for left behind families of the Indian workforce. But this success too has a flip side to it, that is the unskilled workforce accommodated in gcc region. The sluggish economic growth, the decrease in oil prices, completion of major construction projects and nationalization policies have reduced remittances share from gulf and left future of unskilled workers in obscure.
As per world bank predictions the increase in remittances is due to some major factors like the migrants’ gradual structural shift from key destinations like gulf region to more advanced economies like United states and UK. The gulf countries have informal employment mechanisms with low-slung career advancement pace motivating skilled workers to join high-skilled jobs in high income countries. This shift is believed for the increase of about 12 percent remittance flow for 2022 from 7.5 percent in 2021 making skilled workers a dominant contributor.
The other factors that are being associated with remittance increase are the wage hike, the re-opening of various employment sectors and the strong labour market in host destinations like the US and other OECD countries. The report also mentioned that migrants increasingly turn to informal networks rather than formal channels for exchanging currency and transferring remittances.
What does this trend mean for unskilled workers?
The US is surpassing the GCC region in remittance contribution to India as more skilled workers prefer developed economies with prospects for growth and income. This trend has been witnessed since 2020-21 when the US, UAE, UK, and Singapore amounted to about 36% of remittances as per the Reserve Bank of India (RBI) report. These four senders are responsible for as much as 54% of the remittance sent back to India. The other interesting facet of this changing trend is the US replacing UAE as the highest remittance contributor owing to faster recovery.
According to RBI, “the share of remittances from the GCC region in India’s inward remittances is estimated to have declined from more than 50 % in 2016-17 to about 30 % in 2020-21”. In the wake of the oil price crash of 2010 and the subsequent one in 2014, Gulf economies have seen slower growth, compounded by Covid-19, the nationalisation measures, including stringent labour regulations and taxation policies. Migrant workers’ rethinking of their migration alternatives in response to these challenges has precipitated a sharp drop in migration to the Gulf.
Country-wise Share in Inward Remittances to India, 2020-21
However, this choice has been available to skilled (white-collar) workers, while unskilled (blue-collar) workers have to stick to GCC markets with lesser or pre-covid wages. This trend will likely persist beyond 2023, given that most GCC countries have not recovered fully. The fluctuations in the oil market are continuing amid the Ukrainian crisis, along with the drive for structural adjustments liberating economies from resource dependence to developed markets.
The gulf economies are further curious about lessening dependence on migrant workers, decreasing the demand for foreign workers. This declining trend is worrisome only for unskilled workers because the diversified economy encourages a competitive market, meaning the exhaustion of major infrastructure projects and lesser demand for unskilled workers. These competitive markets will require a skilled workforce only. It is expected from this trend that the rate at which workers’ remittances are received will be slowed by the current negative trend in GCC economies, and the possibility of further financial troubles will continue beyond 2023. The biggest challenge is the erosion of existent wages for migrants, which were adjusted during covid by the host countries. Lower economic activity and dwindling demand for hydrocarbons do not bode well for wage increases or the restoration of pre-recession levels.
What can be done to secure jobs for unskilled workers
Efforts to protect the rights and well-being of migrant workers require concerted action from the host and home country governments. India needs to keep up its reform efforts on various fronts, including with Gulf governments, business owners, recruitment agencies, and the Indian diaspora. India must advocate for the implementation of the revision in the existing Kafala system, the new labour laws, including standardisation of minimum wages, and the penalties for rights violations by employers.
To prevent the disastrous situation caused by COVID-19, the government of the country of origin should put in place a system of emergency aid, support, and evacuation infrastructure, especially for low-skilled labourers. In light of the severe issues like coercive work contracts, wage theft, exploitative working conditions, and deaths of workers in Qatar in particular and the Gulf region as a whole that has surfaced in the wake of the world cup controversy, Indian authorities should persuade Gulf governments to allow its expatriate workforce to form unions. In addition, the Indian embassies in the Gulf region can be linked to these organisations to speed up the resolution of complaints.
Government should empower embassies to routinely host counselling sessions on workers’ rights, local laws, and safety precautions. Pravasi Bharatiya Divas and other gatherings of the Indian diaspora should be held regularly at state levels, sending the most unskilled workers to the Gulf, such as Uttar Pradesh and Bihar, to generate consciousness about the dangers fraud & practices done by recruitment agents and promotes healthy and safe migratory routes.
There is a need for a structural adjustment policy securing jobs formally than being hired informally by recruitment agents and labour-supplying companies in destination and source countries. To train and equip unskilled and low-skilled workers for more skilled jobs in the GCC. With the increasing bilateral trade agreement & negotiations between West Asian countries, India should use such forums to negotiate for employment security, including wages for Indian ex-pat workers. For example, with UAE, India is strengthening trade and investment through new businesses, which India can leverage for pleading the case of migrant workers.
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Muskan Mustaqeem, Scholar, CWAS, JMI.
Inspite of receiving such a large amount as remittance our current account deficit is expected to be 3 to 3.2 % of our GDP, that would be nearly 100 billion USD mainly because of merchandise trade deficit which is expected to be more than 250 billion USD in 2022-23.
Instead of rejoicing for the highest remittance receipt in the world we should focus on decreasing the merchandise trade deficit.
Here we should keep in mind that China is equally populous as India but its merchandise trade is not in deficit.