The term “Remittances” basically refer to the transfers, in cash or in kind, from a migrant to household residents in the country of origin (COO). It is growingly acknowledged in South Asia that foreign labor migration helps promote national economic growth, eases the pressure of unemployment, brings in much-needed foreign exchange through remittances and increases consumption, savings and investment at both the household and macro levels.
While Nepal has a long tradition of overseas employment, other factors have contributed to an increase in labor migration in recent years. Starting in the early 19th century, Nepalese have served in various armies in pre-colonial and colonial India. This tradition continues and Nepalese are employed in the Indian and British armed forces. Earnings and pensions from these soldiers form a sizeable portion of remittances. However, with rapid population and labor force expansion and inadequate growth, the absorptive capacity of the domestic economy has been stretched.
India has been a traditional destination for Nepalese migrants. The main reasons for this are geographical proximity, historical and cultural links, and a large and open porous border. The 1950 Treaty of Peace and Friendship between India and Nepal formalized free border movement of people. The bulk of these migrants are employed in the private, informal sector. These migrants hold semi-skilled and unskilled jobs in restaurants and factories or are employed as domestic workers, security guards, and maids. However, the lion’s share of the remittances from India are not recorded in the BOP as they are brought in by the migrants themselves or sent through relatives and friends.
An increasingly larger share of remittances now comes from countries other than India, reflecting changing migration patterns and higher earnings in these locations. Moreover, the composition of skills of the labor flows is different among these destinations. While migrants to the Middle East are employed mostly as security personnel, chauffeurs, and construction workers, the demand from South East Asian countries is more for employment in industrial enterprises. Monthly earnings for these workers are higher than those in India.
Owing to the widespread conflict in the country until recently, many workers viewed foreign employment as their only viable option. Again, paucity of economic opportunities at home and rising employment prospects abroad have also tempted Nepalese to seek employment abroad. With the increase in the number of workers, the inflow of remittances has also taken an upswing. Remittances rose from Rs. 47.5 billion in 2001/02 to Rs. 142.7 billion in 2007/08. Moreover, the share of remittances incoming through the official channel has been going up. For instance, while in 2001/02, out of total remittance income, just about 27% flowed into the country through the official channel as against 73% through the unofficial channel, in 2007/08, on the other hand, about 91% entered through the official channel and the rest through the unofficial channel.
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