Kathmandu, August 8:

Nepal received an average of Rs 12 billion in remittance annually from India over the past six years, although a mere one per cent of the amount was remitted through official channels.

The remittance inflow from Indian has maintained a growth of an average 23.67 per cent over the past 15 years against 37.78 per cent growth in total inflows.

However, the share of Indian remittance out of the total remittances dropped to 12.4 per cent in 2005-06 from 45.5 per cent 1989-90. Nepal had received Rs 968.7 million in 1989-90, which climbed to Rs 12.10 billion in 2005-06.

On the other hand, the share of overseas remittances grew dramatically by 87.6 per cent to Rs 85.43 billion in 2005-06 from more than Rs 1.15 billion in 1989-90.

An interesting point to note is that the migrant workers’ remittances alone contributed to 16.7 per cent to the country’s gross domestic products (GDP) in 2005-06, while the contribution of remittance from India stood at 2.1 per cent, reveals a ‘Study Report on Remittances from India’, published by Nepal Rastra Bank.

The central bank’s report, which is based on surveys in New Delhi and five major border points along the Indo-Nepal border, is first of its kind of a study on remittance from India.

The study has revealed that the majority (99 per cent) of the remittance from India comes through unofficial channels such as through friends and relatives or workers bringing the money themselves when they come home on leave.

The report points out the need of encouraging workers for using official channels such as banks and financial institutions as well as money transfer agencies to remit their hard earned money back home.

The banks and financial institutions both in Nepal and India are yet to exploit a huge scope of inward money transfer business from India to Nepal, says the report.

The report contemplates that the decelerating reserve of Indian Currency (IC) in Nepal could be controlled if remittance from India was routed through official channels.

It is worthwhile to note that the central bank purchased Rs 64 billion worth of IC by paying $920 million from its reserves during the fiscal year 2006-07 alone to finance trade deficit among others.

The study has found that most Nepali migrant workers in India are unskilled or semi-skilled, earning IRs 3,000-4,000 a month. An interesting finding to note here is that the majority of these workers hail from hill districts of western and mid-western Nepal.

New Delhi, Mumbai, Himanchal Pradesh and Haryana are the major destinations for Nepali migrant workers in India, while many of them are working in Gorkha Rifles of the Indian Army.

Based on a field survey in New Delhi, the report estimates that a Nepali worker can remit an average of IRs 25,016 a year, which is more than double of what previous estimation of Nepal Living Standard Survey 2004 had. It had estimated per capita remittance from India at IRs 11,510.

The report suggests that concerned stakeholders including the government, central bank, diplomatic missions and others should actively get involved in encouraging workers to use official channels for inward transfer of remittances.

Banks and other financial institutions should also review their service fees, which are said to be relatively high.

An increase in access to official channels both in India and Nepal, and provisions of identity cards for workers could also increase the flow of remittances through banking channels, sums up the report.