Remittances, considered to be ‘easy money’, are wasted on spurious consumption. The state must channel it towards productive investment, writes AMBA PANDE
Every time there is a crisis in the Gulf, the welfare of Indian workers in the region crops up. But the issue of safety and security should not be limited to the physical threat faced by the workers during the war times but must also focus on the exploitative conditions which they face even during peace times.
The exploitation is at both ends — that is, in the host country as well as at home. labourers keen to travel to the Gulf for better work opportunities are often duped by unscrupulous agents. They pay large amounts of money, which is borrowed locally at high interest rates often by mortgaging land, to the agents. In their host countries, they face difficult living conditions and have no institutional backing to redress their problems. They are often thrust into underpaid jobs and when there is a breach of agreement, the workers can do little as often their passports are confiscated by the employer. Thus, they are pushed from one exploitative situation to another.
Also, even though immigrant workers in the Gulf are faced with extreme hardships, they are compelled to continue with the job due to the debt burden, not to mention a dependent family back home. Effectively, they are trapped. It is difficult to come out of the situation, unless an alternate livelihood can be arranged. This is easier said than done as the home economies are overall backward and the avenues for investment are few.
Moreover, the issue is not only about the exploitation of workers but also the failure on part of the Government of India to squeeze out maximum developmental potential from the millions of dollars it receives every year in the form of remittances. Remittances are the most effective tool in a diaspora-led development model but only if there is a proper mechanism, backed by appropriate state policies, to utilise its potential. Otherwise, the money is spent on spurious consumption. Remittances account for three to four per cent of India's Gross Domestic Product and can be an additional advantage to the country.
The importance of remittances in developing countries is widely recognised. They contribute towards foreign exchange earnings and macro-economic stability as well as have a direct impact on poverty reduction, since the money flows directly to poor households. Remittances also provide scope for accumulation of wealth and asset creation, and have a multiplier effect on local economies.
India has been the highest remittance-receiving country for several years and Gulf workers contribute a major share to the remittance pie. In fact, remittances play a crucial role in the economies of several States like Kerala, Goa and Punjab, where their share to GDP ratios are as high as 30, 20 and 10 per cent respectively. Case studies on Kerala and Punjab reveal that remittances have not only helped in raising the living standard of households but also boosting development in the region.
However, there are some negative impacts of remittances as well. The ‘easy money' is often treated like allowances, and squandered on liquor, drugs and other spurious consumption. In India, a small percentage of the remittance money goes into productive entrepreneurial investments and livelihood diversification efforts especially in the rural areas. The situation is more worrying in States like Uttar Pradesh — here, migration to the Gulf is increasing but remittance money has not made a significant impact on the local economy.
To convert remittances into a viable instrument for sustainable investment in rural areas, the Government must intervene and streamline its utilisation. For instance, it must encourage pooling and channeling remittance money into small and micro enterprises. By using remittance money as a positive force to support a sustainable development model, the Government can boost local economies, empower the families of the migrant worker and also save the migrant workers from the trap of exploitation.