How does a country get benefitted if it gets remittance income from other countries?
Answer:
There are several benefits.
By one measure of national income (GNP) remittances are counted as regular income, unless those earning it are expatriates not US citizens, and thus the money they earn in the US is counted regardless of whether they send it home or keep it in the US. By another measure of national income (GDP) it is counted as regular income only if received by and spent in India (GDP counts it indirectly).
The expenditures benefit India regardless of how they are spent. Consumption is, after all, the largest portion of spending in GDP or GNP for most nations. Moreover, expenditures on investments do not necessarily benefit the industry whose equities you purchase. ie, if you buy 100 shares of Anheuser-Busch (ticker: BUD) the company never sees a dollar of your money. But the person who bought it from the person who bought it from ...etc... the person who bought it in the IPO gave Anheuser-Busch the money in exchange for the shares hoping to sell them at a premium. My guess is that no one received less than they spent along the line, so your demand in the end helps A-B.
For most expatriates (and even naturalized citizens) one of the greatest benefits of remittance income is that is a source of foreign exchange which is quite useful if a nation's currency is weak or untrustworthy (consider Zimbabwe where the 60-day T-Bill offers nearly a 200% return due to inflation) or if dollars are more desireable than local currency. Also, consider that, where US salaries remain constant (you make $700 last week, $700 this week, and also next week, etc.), if the dollar appreciates against the home currency, then every successive remittance brings greater purchasing power to the recipients.
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