India’s remittance strength faces West Asia risk as report flags migrant concerns

India’s remittance inflows continue to act as a critical buffer for the economy, but escalating tensions in West Asia are raising concerns over job security for Indian workers in the Gulf, prompting calls for policy intervention.

According to a report by Morgan Stanley, India received nearly $138 billion in remittances in FY2025, marking a 15 per cent increase from $120 billion in FY2024. These inflows have financed 40–45 per cent of India’s merchandise trade deficit, playing a vital role in stabilising the country’s external balance.

However, the ongoing conflict in West Asia has introduced fresh risks, particularly for Indian migrant workers employed in construction, hospitality, and domestic services, sectors highly sensitive to economic slowdowns.

The report highlights that while the Gulf Cooperation Council (GCC) countries—including the UAE, Saudi Arabia, Qatar, Kuwait, Oman, and Bahrain—remain key contributors, their share in India’s remittance inflows has declined from 47 per cent in 2016–17 to 38 per cent currently, indicating a gradual diversification of income sources.

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States such as Kerala, which accounts for nearly 20 per cent of India’s total remittances, remain particularly vulnerable. Around 80 per cent of Kerala’s overseas workforce is based in the Gulf, making household incomes and consumption in the state susceptible to any downturn in the region.

Morgan Stanley also warned of a precautionary dip in remittance flows as uncertainty grows. Migrant workers may delay transfers or hold back savings amid disruptions in employment and money transfer channels.

Against this backdrop, the report underscores the need for targeted government support to help returning migrants reintegrate into the domestic economy. This includes employment assistance, skill mapping, and financial inclusion measures.

It also calls for stronger diplomatic engagement to safeguard the welfare and employment of Indian workers abroad, especially in volatile regions.