For the past several decades, Kerala had been the largest recipient of migrant remittances in India

Image Courtesy: The New Indian Express

THIRUVANANTHAPURAM: For the past several decades, Kerala had been the largest recipient of migrant remittances in India.

The state was fortunate to reap the fruits of ‘dynamic multiplier effect’ when the foreign remittances were at the peak in the country, thanks to tens of thousands of Keralites who had toiled hard in foreign countries, mainly in West Asia. 

The scenario underwent a drastic change in the recent past. The world which came to a temporary standstill due to the unprecedented migration is yet to recover from its impact. The aftereffects of the migration shock are more visible in Kerala economy than any other parts of the country. 

To understand how a fall in foreign remittances has hit the state’s economy, one needs to understand the multiplier effect.

For example, a foreign remittance of Rs 1 lakh which was infused into the construction industry would be circulated among several layers of the economy which support each other.

Of the Rs 1 lakh distributed among the workers and resource suppliers, Rs 75,000 would again be distributed among sectors that depend on the construction sector.

These entrepreneurs circulate another Rs 50,000 among another layer of workers engaged in supporting sectors.

Since the lion’s share of the remitted income is consumed, adding to the aggregate demand (AD), the multiplier effect leads to an even greater boost to economic growth. 

As foreign remittances have dropped, Kerala is poised to witness the ‘reverse multiplier effect’.

Since money from remittances goes directly to families, the majority of the spending in Kerala was mainly in two sectors — household consumption and construction sectors.

The reverse multiplier effect because of the drop in foreign remittances would affect the household consumption and investment activity, which would have a bearing on the GDP growth of the country. This way, Kerala has been witnessing an unprecedented crisis since the Covid outbreak. 

As the crisis continues, the amount of money migrant workers send home is projected to decline by 25-35% by March 2022, compared to the pre-Covid levels.

Martin Patrick, a Kochi-based economist, who has studied the migrant workers’ work and life, said, “Kerala would witness a drop of around 25-35% in foreign remittances by 2022 and there is no wonder if it drops further to 40%. If Rs 85,000 crore was the foreign remittances sent to Kerala by the emigrants in West Asia in 2018, it rose to over Rs 1 lakh crore by 2020.Now, a 25-35% anticipated drop in foreign remittances would be a severe blow to the state as it leads to a reverse multiplier effect which eventually would shrink the GDP of the state further,” he said.

‘Kerala Return Emigrant Survey 2021’ carried out by the Centre for Development Studies (CDS) and the International Institute of Migration and Development (IIMAD) using the computer-assisted telephonic interviewing (CATI) method found that almost 60% of the returning emigrants (REM) wish to re-migrate in search of a job, while 30% of them wish to reintegrate into Kerala society and find the means of employment or retirement here itself. Further, among the 47% who lost their jobs as a result of Covid impact, 39% have reported non-payment of wages or dues as well as a reduction in wages. 

S Irudaya Rajan, chairman of the International Institute of Migration and Development, said “The actual number of emigrants who returned here as part of Covid-induced uncertainty from foreign job markets and how many of them went back to their job destinations are still not clear. According to the estimates in the latest budget, 14.33 lakh emigrants returned to Kerala between May 2020 and April 2021. Around 30% of them wish to reintegrate into Kerala society and around 2 lakh of them didn’t get their full wages and other benefits as assured by their employers,” he said, adding that this figure might only be a tip of the iceberg.

It would take at least two more years to achieve normalcy in the migrant job market unless there are no more any major shutdowns or lockdowns in migrant-host countries.

There would also be a shift in migration destinations by 2024. The state government should take urgent steps to re-skill the unskilled labourers who reached here to suit the requirements of the post-Covid world, he said. 

In fact, the reverse migration to Kerala had begun even before the Covid outbreak after unskilled people from other Asian countries flooded the West Asian job markets.

Covid has aggravated the situation and a good number of semi-skilled people have also lost employment during the pandemic.

But at the end of the day, Kerala should be ready to address the shortfall in foreign remittances along with equipping the returned emigrants for re-migration by reskilling them, said Martin Patrick.

Highlights of ‘Kerala Return Emigrant Survey 2021’ 

More than half of the return emigrants are below 39 years. Normal return emigrants are the oldest (average age 45.8), distressed return emigrants younger (39.5), and returned to re-immigrate the youngest (34.8).

49% of the sample households are Muslim, 35% Hindu, and 15% Christian. 93% of the respondents are male and the rest are female.

In terms of migration history, 80% of the sample had worked previously in only one country (held one job), 16% worked in 2 countries (held 2 jobs).

Rs 36,000 The median salary reported among the return migrants is Rs 36,000 in the last job prior to return because of Covid.

Overall, 63% of the return emigrants did not acquire any of these assets and this in general indicates that re-migration will be an important aspiration going forward, in the post-pandemic world.

Wage theft

Among the 47% who lost their jobs, 39% have reported non-payment of wages or dues as well as a reduction in wages. Among the workers who were asked to resign by the employers, 40.9% experienced wage theft.

Among those who managed to work during the initial months of the pandemic, 8.8% worked without wages and later lost their jobs, while 18.2% faced a reduction in wages.

Likewise, 10.9% of the workers whose work visas were not extended experienced wage theft. 61.1% of workers who did not receive their wages and benefits had the experience of more than 5 years

The return of emigrants and the reverse multiplier effect will severely impact the state’s economy as foreign remittances are expected to decline by 25-35%. 14.33 lakh emigrants returned to the state between May 2020 and April 2021. The state should be ready to address the shortfall in foreign remittances and reskill returnees to re-migrate, say experts.

Views expressed by the author are personal and need not reflect or represent the views of Centre for Public Policy Research.

This article was first published in The New Indian Express

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Dr Martin Patrick is Chief Economist at CPPR. He holds a PhD in Applied Economics from the Cochin University of Science and Technology (CUSAT), Kochi and also had a post-doctoral training at Tilburg University, Netherlands. Presently, he is a Visiting Fellow at Indian Maritime Institute, and Xavier Institute of Management and Entrepreneurship, Ernakulam.

Dr. Martin Patrick
Dr. Martin Patrick
Dr Martin Patrick is Chief Economist at CPPR. He holds a PhD in Applied Economics from the Cochin University of Science and Technology (CUSAT), Kochi and also had a post-doctoral training at Tilburg University, Netherlands. Presently, he is a Visiting Fellow at Indian Maritime Institute, and Xavier Institute of Management and Entrepreneurship, Ernakulam.

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