ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Perceived Economic Well-being among Rural Indian Households

Investigating the Role of Remittances

The Census 2011 estimated the presence of 450 million internal migrants in India, which is an increase of 45% over the Census 2001. As a corollary, the domestic flow of remittances has seen a significant rise. This paper aims to understand how this financial support affects the perceived economic well-being of households in rural India. The analysis shows that the recipient family’s estimation of their economic status improved dramatically after receiving these payments. It discusses the importance of frequency of receiving the remittances in order to understand the impact on the economic sentiment. For households who got continuous payments over the study period, the effect is positive and appears to be stronger.

Over the last few decades, India has seen a massive occupational shift away from agriculture, accompanied by an emerging trend of labour migration as an alternative livelihood strategy (Choithani et al 2021). The migration process is a mutual contract between the migrant and the remaining household members at the place of origin (Stark 1991; De Haas 2010), and the migrants maintain close ties with the household members they leave behind by sending back a portion of their earnings, known as remittances (Datta 2016). This remittance inflow funds a significant portion of household health and educational expenditures (Mahapatro et al 2017). Over the last few decades, developing countries, such as India, have seen a significant increase in inward remittance flows to the rural areas. By 2017, India had become the largest recipient of remittances, amounting to $69 billion (World Bank 2018). Domestic remittances were estimated to be $10 billion in 2007, with 80% directed to rural households and acc­ounting for nearly 30% of consumption expenditure in households left behind (Tumbe 2011; Rahman and Mishra 2020).

What effect does remittance inflow have on the well-being1 of households that remain in their place of origin? Well-being being a multifaceted and diverse concept enables scholars to assess it in a variety of ways, including needs and capabilities (Sen 1999), vulnerability and livelihood strategies (Bebbington 1999), and self-reported or subjective assessments of their quality of life (Diener 2006). To assess well-being, researchers have used both subjective and objective methods (Sulemana et al 2019). The objective measures are based on quantifiable indicators such as health and education spending, income, asset accumulation, and so on. The majority of the existing literature examined the impact of remittances on objective measures of welfare, such as consumption, investment, health status, educational attainment, poverty, labour force participation, and so on (Anderson 2014). Adams and Page (2005) revealed that receiving remittances has a significant impact on poverty reduction in 71 developing countries. Several other studies found that remittances had a positive impact on household poverty status and consumption expenditure (Nguyen et al 2017). Furthermore, some evidence suggests that households use remittances to acquire assets and invest in business activities (Mahapatro et al 2017). Scholars such as Das et al (2020) observed that households invest significant amounts of remittances in human capital as a long-term investment, such as healthcare and education.

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Updated On : 8th Mar, 2023
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