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Dynamic Multiplier Effects of Foreign Remittances

India continues to be the largest recipient of remittances across the world, with a tremendous growth in private unrequited transfers from just ₹12 billion in 1990–91 to about ₹1,009 billion in 2015–16. Emphasising this component of remittances that India has witnessed during the post-liberalisation period, the article investigates the demand-side macroeconomic effects of the flow of private transfers on key variables such as consumption, investment, imports, and income in India during the post-reform period of 1996–2014.

India’s Faltering Demand Conditions

Various assessments highlight the “robust” signs of revival and resilience shown by the Indian economy since the second half of 2017–18. Citing the near-term data, these not only undermine the demand-side instability that the economy has been witnessing since the past few years, but also underestimate the role of domestic demand as India’s primary engine of growth, unique amongst the major emerging economies. The assessement of the major components of aggregate demand and analyses of the growth rates of different sectors during the last few years reveal some interesting specifics for an economy that is yet to gain full momentum.
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