Mar 21, 2024
India's Initiative to Reduce Cross-Border Remittance Costs at the WTO
India is actively working towards reducing the costs associated with cross-border remittances, a move that aligns with its broader economic and social objectives. Here's a detailed explanation of why and how India is pursuing this initiative at the World Trade Organization (WTO):
Why India is Focused on Lowering Remittance Costs
1. Economic Impact : Lowering the cost of remittances can significantly benefit low and middle-income countries, which received 78% of remittance flows in 2023. India, being one of the largest recipients of remittances globally, aims to make these financial transfers more affordable for its diaspora and their families back home.
2. Meeting Global Targets : The global average cost for sending remittances stood at 6.18%, more than double the Sustainable Development Goal (SDG) target of 3%. By pushing for lower costs, India aims to align international practices with these global benchmarks, ensuring that more money reaches the intended recipients rather than being spent on transaction fees.
3. Enhancing Financial Inclusion : High remittance costs can deter individuals from using formal remittance channels, pushing them towards informal, and potentially less secure, methods of money transfer. Lowering these costs can promote the use of formal channels, thereby enhancing financial inclusion.
How India is Pursuing the Initiative
1. Proposal at WTO : At the WTO’s 13th Ministerial Conference in Abu Dhabi, India made a formal proposal to lower the cost of cross-border remittances. The proposal suggested the initiation of a work programme by the WTO's General Council (GC) to make recommendations on achieving this goal.
2. Promoting Digital Solutions : India emphasized the importance of interoperability and interlinkages of digital payment infrastructures, including fast payment systems, to make cross-border payments and remittances cheaper, faster, and more transparent. The proposal highlighted that digital remittances are significantly cheaper than non-digital ones.
3. Gathering Support : The initiative received backing from several countries, including Sri Lanka, Nepal, Bangladesh, and even showed interest from the European Union. This broad support underscores the universal appeal of the initiative.
4. Engagement in WTO Bodies : Following the inconclusive results of the Ministerial Conference, India continues to pursue the matter through various WTO bodies, including its General Council and committees focused on trade in services and financial services.
5. Comprehensive Review : India’s approach includes a thorough review of the costs, trends, and developments related to cross-border remittances. It aims to understand the impact of technology, new market players, diverse types of providers, and changes in consumer behavior on remittance services.
By advancing this initiative, India not only champions the cause of reducing remittance costs globally but also seeks to directly benefit millions of individuals who depend on these financial flows for their livelihood. This effort reflects India’s commitment to leveraging international cooperation and technology to achieve economic and social objectives.
SRIRAM's
