MUMBAI: While remittances from Gulf Cooperation Council (GCC) has registered a marginal drop in FY16 due to the steep fall in oil prices, rating agency Crisil Research said the situation isn’t as bad as it appears given the fact that India’s trade deficit with GCC has narrowed 77 per cent in last three years.
Remittances from GCC declined for the first time in six years, falling 2.2 per cent to $35.9 billion. More than half of India’s remittance income comes from GCC. Falling oil prices have had a sweeping impact on the oil producing economies of GCC, severely denting their oil revenues and spending by both governments and households.
“The GCC remittances was marginal despite a 47 per cent slump in oil prices in 2015. This indicates that these economies — especially Saudi Arabia and the UAE, which are the largest two remitters within GCC – are relatively less dependent on oil income,” said Crisil Research.
While falling oil prices have curbed India’s exports to GCC, the rating agency pointed out that the imports from GCC have also fallen steeply. “This has helped alleviate some stress from lower remittance and export income. In fact, India’s trade deficit with the GCC has fallen a whopping $46 billion, or 77 per cent, in three years, to $14 billion because of rapidly declining imports,” Crisil said.
According to it, the current level of remittance at around $36 billion has funded the goods trade deficit leaving a surplus of $22 billion. The World Bank expects global remittance flows to recover this year after bottoming out in 2015 with growth driven by continued economic recovery in the United States and the euro area and a stabilisation of the dollar exchange rates of remittance-source countries.
