Do Remittances Promote Economic Growth? New Evidence from India

This study investigates the empirical relationship between remittances and economic growth of India, placing special attention on the non-linearity of this association. Previous studies on India have ignored the non-linear nature of the remittance-growth nexus. The study employs methods from the ARDL model framework to explore the non-linearity and establishes that remittances do not exhibit any growth effect in lower quantiles and up to 0.50, but the impact increases monotonically, getting more pronounced as the quantile increases. In other words, inward remittances must exceed a threshold to start affecting economic growth positively. It is argued that this behaviour of the remittances is the consequence of a combination of factors like patterns of utilisation (or, misutilisation) of the receipts, India’s trade balance, a weak industrial sector, the lack of entrepreneurial opportunities, the lack of financial inclusion, and the exploitation of poor migrant workers.