India’s Remittances Remain Stable Despite West Asia Crisis
Reserve Bank Deputy Governor Poonam Gupta on Friday exuded confidence that inward remittances to India will not be impacted despite the West Asia crisis, and that the country’s Balance of Payments (BoP) will be comfortable.
“India’s BoP has some inherent strengths…two are on the current account side, and one is on the capital account side. Our remittances are solid, USD 135 billion plus, only move in one direction, which is a healthy growth every single year, even during COVID, they declined by a tiny bit,” she noted.
Strong Remittances and Services Exports
Services exports have been doing very well, and even FDI inflows. These are structural strengths, which means shocks may happen, but these strengths would be there, she said at the ICPP Growth Conference.
On the flip side, she said, portfolio flows have been weaker than in the past, which has been countered by other parts of the balance of payments. To learn more about balance of payments, visit our website.
Remittances: A Stable Form of Inflows
On remittances, Gupta said that the share of West Asia has declined to 40 per cent of the total inflow and the migrant pool is now diversified across geographies.
They are now working in various sectors, including IT, hospitality, health, education, and construction, she said, adding that even if one or two sectors are impacted, it does not have much bearing on inflows. For more information on remittances in India, click here.
Inflation Targeting Framework
On the issue of inflation targeting, Gupta said regional heterogeneity in inflation may warrant a closer assessment when the government and the Reserve Bank of India will next review the framework.
The next review of the inflation targeting framework is due in 2030-31, as it is reviewed every five years. To understand the inflation targeting framework in detail, visit our website.
Gupta wondered whether differential consumption or inflation patterns across states warrant a more nuanced approach.
As a possible question that may be asked at the time of the next review, she said. Another key area for discussion during the next review would be greater transparency in core inflation data, work on which has already begun, she said.
Flexible Inflation Targeting Framework
The flexible inflation targeting framework was reviewed in March 2026, wherein the target was retained at 4 per cent, with a tolerance band of 2 per cent on either side.
The monetary policy framework was introduced in May 2016 with the implementation of the flexible inflation targeting framework. In the first review conducted in March 2021, the target and range were retained for a period of five years, ending March 2026.
Gupta said that the flexible inflation targeting framework provides flexibility in the wake of heightened uncertainties and supply-side disruptions and helps stabilise growth over the business cycle.
It also limits the need for frequent changes in policy rate, thereby reducing the risk of policy-induced volatility. To know more about monetary policy framework, click here.