Importance Of Remittance In An Economy

Author : Shashank Bhaskar | Published On : 08 Mar 2021

When there is a flow of money across international boundaries, the scope for improvement is noticeable. It is the people working abroad transfer income to their close ones in the home country. The process of such transfer is called remittance. The process gets carried out through banks if the beneficiary has a bank account. You can also do it online and through financial service companies.

The process of transferring money helps in uplifting the economy. It creates a favourable relationship between exchange and economic growth. Trading of money has implications on the working of any country. Let us understand the impact of the same on the economy: 

Enhances Foreign Exchange reserve: Inward flow of finances maintains the value of rupee against other currencies. It raises the Gross Domestic Product value. The result of this is an increase in the foreign exchange of India. It helps the economy to profit from sources other than exporting. However, an increase in the outward fund transfer is a concern because it has the opposite effects. 

Growth of Economy: The funds received through foreign remittance is called hot money. It is because of the value it brings to the economy. The money moves from advanced countries to developing ones to generate economic harmony. It also helps maintain stability in the market by improving Foreign Exchange. Thus, it enhances the growth in the economy.

Improves Standard of Living: The money transferred through online money transfer is mostly from the working class to their family. It helps in tackling poverty and fulfilling the needs of the citizens in the country. It helps them meet their emergency and educational needs contributing to a healthy lifestyle.

Increase in Investments: The amount received through international transfer differ in value to the Indian rupee. According to reports, that such amounts get invested mostly in banks of rural India. It increases banking activity and the flow of funds in the economy. In turn, it helps banks have funds to lend to aspiring entrepreneurs and farmers in rural India. 

Money flowing from across borders is bound to impact the economy. Such transfers are not only crucial to individuals but also to the economy. The higher inward flow of funds is good for the growth of the economy.

With the changing technology, the process has become seamless. You can now use the money transfer app to cut down the hassle of paperwork.