Despite the capital outflows from financial markets and subdued net foreign direct investment (FDI) inflows, India managed to record a Balance of Payments (BoP) surplus of $7.22 billion in the January-March 2026 quarter, aided by a factor thought to be at risk from the West Asia conflict: remittances from abroad.

In the first quarter of 2026, Indians working abroad sent home $31.07 billion — the most in 13 years, as per Reserve Bank of India (RBI) data — registering a year-on-year growth of 34%. But what is more striking is the annual figure.

A new record

In 2025-26 as a whole, Indian workers abroad sent back home a record $110.47 billion, up 26% from $87.55 billion in 2024-25, with economists suggesting that the West Asia crisis likely led to a “precautionary” rise in remittances.

This is the first time that workers’ remittances have ever crossed the $100-billion-mark in a single year. The more widely quoted remittances number — which has been above $100 billion for four years in a row now — is, in fact, not remittances as we think of them, but a broader category called ‘private transfers’.

👁 remittances

While workers’ remittances make up more than two-third of private transfers, this category also includes withdrawals from non-resident deposits and their redemption, personal gifts and donations (including to religious and charitable institutions in India), and gold and silver brought through passenger baggage.

Private transfers rose 15% in 2025-26 to $151.71 billion, while net transfers (after adjusting for money sent abroad) was up 16% at $144.07 billion.

Mutual benefits

In addition to the war, the rupee’s sharp fall over the course of 2025-26 would have also incentivised the sending of more dollars (or any other currency) back home than usual as it would lead to family members in India getting more rupees for each unit of the foreign currency.

“Thankfully, remittances have not been adversely affected. And there are no indications they have been (post March),” a senior government official said on Tuesday.

One must indeed be thankful for such strong workers’ remittances at a time when the inflow of other types of foreign money has dried up alarmingly, be it Foreign Portfolio Investment (FPI) or FDI. If not for these remittances, the rupee may have fallen even more.

Shifting sands of remittances

The West Asia war presented a new hurdle for India’s external balance because of the number of Indians working in the region. However, as per the RBI’s latest survey on remittances, inflows from the Gulf countries of UAE, Saudi Arabia, Kuwait, Qatar, Oman and Bahrain had declined from 47% in 2016-17 to 38% of the total in 2023-24.

As such, while this means that any hit from the war may not be as large as it would have been before, any benefit from a greater number of Indians being employed once reconstruction efforts begin will also be limited.

The fall in the Gulf region’s share in India’s inward remittances has been matched by an increase in contribution from advanced countries such as the US and the UK — regions grappling with the impact of increasing adoption of artificial intelligence (AI) on current and future employment.

A long-term solution

Remittances, however, cannot be relied upon to bail out the Indian economy. FDI and FPI inflows must improve, while the trade deficit will have to be managed. And although the government is not done announcing measures, it knows its hands are tied beyond a point.

“When it comes to gold, nothing we do is enough,” government sources said. “People want gold for lots of reasons like traditions, weddings, and investment. We can only provide a nudge, like the Prime Minister had done.”

FDI inflows – which totalled less than $9 billion in 2024-25 and 2025-26 combined on a net basis – are another difficult subject as it has been on the decline – as a percentage of GDP – since 2010.

“I am not sure if any one step will address the FDI issue,” the aforementioned government source said. “Yes, steps are required. We will take them steadily.”

For the time being, the measures already announced – from the removal of taxes on foreign investors’ bond investments to the swap scheme for Foreign Currency Non-Resident (Bank) deposits and PSUs’ foreign loans – have materially changed the outlook for the rupee, with the BoP expected to be roughly neutral in 2026-27. Economists broadly see the rupee hovering around the 94-96-per-dollar levels, with the RBI expected to discourage any strengthening as it mops up as much of foreign inflows it can to build up its foreign exchange reserves.

“Nonetheless, the current account deficit remains heavily oil-driven and oil prices remain elevated. We think importers may use the dip in USDINR (exchange rate) to buy more USD cheaply. Moreover, India’s relatively low real yield means that yield-seeking investors are unlikely to be as strongly attracted in the current environment,” Barclays’ forex strategists Mitul Kotecha and Audrey Ong said in a note on Tuesday.