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The impact of infectious diseases on remittances inflows to India

Shruti Shastri

Journal of Policy Modeling, 2022, vol. 44, issue 1, 83-95

Abstract: The economic crisis triggered by the COVID-19 pandemic seems to be grimmer when observed from the migration perspective. Remittances play a vital role in economic development of India through promoting output growth, household spending on health and education, poverty alleviation, financial inclusion and entrepreneurship. Given the importance of remittances, it is important to analyse how the current pandemic will influence the remittances inflows to India. Towards this end, the study employs a gravity model approach to the determinants of remittances with special attention to the impact of infectious diseases in the host countries. The present study constructs a dataset on bilateral remittances from 99 destination countries and utilizes the data on prevalence of infectious diseases in the host countries during the period 2000–2018 to assess the impact of the latter on the inflows of remittances to India. The results of the study based on a variety of estimators tackling various econometric issues suggest a statistically significant negative impact of prevalence of infectious diseases in the host country on the inflows of remittances. The negative impact of infectious diseases on remittances suggest that while there are downside risks in the wake of current pandemic, the scenario does not seem to be that bleak as the remittances to India are countercyclical with respect to economic growth in the home country and largely decoupled from host country macroeconomic fundamentals. As the remittances act as shock absorbers during the time of low economic growth in the home country, India must further build up a conducive eco system to nurture these valuable foreign exchange in a well directed manner.

Keywords: Remittances; Infectious diseases; Gravity model; Panel data; India (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jpolmo:v:44:y:2022:i:1:p:83-95

DOI: 10.1016/j.jpolmod.2021.08.001

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