West Asia Conflict Threatens India's Remittance Lifeline

A Morgan Stanley report highlights concerns over Indian migrant employment in the Gulf amid the ongoing West Asia conflict. It underscores the need for government support for returning workers and notes a positive shift in remittance sources towards more stable advanced economies, despite the current challenges and risks.

India's remittance inflows remain crucial to the country's external balance. However, the ongoing West Asia conflict raises concerns for Indian workers in the Gulf, highlighting a potential need for governmental support for returning migrants, according to Morgan Stanley's latest report.

The report indicates that India's remittance receipts for FY2024 reached USD 120 billion, rising 15% to USD 138 billion in FY2025 as the global economy rebounds. Notably, these inflows have financed approximately 40-45% of India's merchandise trade deficit, easing balance of payment pressures.

A shift has been observed in the composition of remittance sources, with contributions from the Gulf Cooperation Council countries declining from 47% in 2016-17 to 38% in 2023-24, while advanced economies saw an increase from 30% to 42%. Despite this diversification, the report flags near-term risks due to the conflict in West Asia affecting Gulf economic activity, impacting sectors including tourism and logistics.