The Link Between Migration and Development: Paved by Remittances

Remittances, in its most basic form, can be understood as a sum of money that workers send back to their home, to their families. The link between migration and development, especially in the source country is paved by these remittances, which then act as an impetus to economic growth of that country. In the recent past, there has been an effort towards a free flow of capital, to which Joseph Stiglitz, in line with the argument of migration liberalisation, at an interview with the Carnegie Council says, that the movement of labour has the power to increase global efficiency far more than the movement of capital ever could, to the extent, that even a partial opening up of movements of labour can have a tremendous effect on the global efficiencies. He speaks about an asymmetry, such that, in the movements of labour, it is the developing economies that tend to benefit, while movements of capital benefits more developed, advanced economies.

To put this in perspective, here are some facts: In 2019, remittances to Low- and Middle-Income Countries reached a record high of USD 554 billion, overtaking Foreign Direct Investments (FDIs), from these LMICs, India was the largest recipient of remittances, valued at USD 83 billion. (World Bank, 2020). There is no doubt that these numbers have taken a hit in the face of the COVID-19 pandemic, with a shrinking job market, particularly for immigrants.

Migration, and as a result of which, remittances, have various benefits on different levels, on one hand, they increase the purchasing power in households, making them better consumers. On the other hand, being stable sources of foreign exchange, they help countries withstand external shocks. For Nepal, remittances have helped create a positive balance of payment. (ADB, 2018)

A normal narrative I have often heard gliding swiftly through tea time conversations, is somehow against immigration and emigration simultaneously. These conversations are often held as batons and passed with concerned frowns on their faces. But there is obviously a misunderstanding, for the lack of a less harsh term. A study conducted by IMF proves that diasporas (including emigrants and their children) can actually help raise long term economic growth by 0.6 percentage points in emerging and developing home countries. This is mainly in the form of remittances- for example, remittances represent 30% of Nepal’s GDP! When these remittances are spent on goods and services in the home country, or used in the form of investments, they automatically provide a boost to the economic activity of the home country.

From a development point of view, migration, be it international or intra-national is important; in other words, movement should ideally be discussed at length as a part of policy making for developing nations. There are facts that cannot be denied in the discussion surrounding migration- migrants provide massive monetary contributions to their home countries.

An effective way to realise these remittances to their absolute potential would be to ease the flow through which emigrants may send money back to their families. Indonesia recently implemented policy reforms that enhance the remittance market. It is also important for realising the potential of remittances to be able to study them, for which data at regular intervals needs to be available. As of now, the data available leaves us spoilt for thought.