Remittance Inflows and Economic Development in SAARC Region

Developing countries having a stable population growth or experiencing population dividend have been earning foreign currencies by exporting manpower with varying levels of skills including skilled, semi-skilled and unskilled labors abroad. The inflow of foreign currencies from the expatriates, known as remittance, can play an important role in the economic development and might be considered as a major source of international reserves in comparison with export earnings from goods and FDI inflows respectively. Considering the importance of wage remittances in socioeconomic development in the developing economies, this study tries to investigate the impact of wage remittances on the economic development of the SAARC countries (Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka) using panel data for the period 2011 to 2020. The empirical analysis is performed employing the econometric techniques of panel data regression approach in order to examine whether the relationship between remittances and economic growth in these countries are significant or not. The findings of the study reveal that wage remittances have significant positive influence on economic development in the SAARC region, but the impact is not substantial because the remittances are mostly spent for bearing household expenditures rather than savings and domestic investments.