West Asia Crisis Poses Economic Risk to Kerala as Elections Loom

Kerala's Economy at Risk Due to West Asian Crisis

Key Findings

• Kerala received $23.4 billion in inward remittances in 2023-24, the second-highest among Indian states after Maharashtra.
• Remittances accounted for 17.1% of Kerala's state GDP, the highest among major states, and more than three times Maharashtra's 5% share.
• The national average for remittances as a percentage of GDP is around 3%.

Dependence on Gulf Economies

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• Disruptions in the Gulf region could directly affect household incomes, consumption patterns, and local economic activity in Kerala.
• The state's economy is heavily dependent on remittances from Gulf economies, where a large share of Kerala's diaspora works.

National Remittance Trends

• At the national level, the geography of remittances is shifting away from Gulf economies.
• The US has overtaken the United Arab Emirates as the largest source of remittances to India, with its share rising from 22.9% in 2016-17 to 27.7% in 2023-24.
• The UK has emerged as a major contributor, with its share increasing from 3% to 10.9%.

Global Remittance Flows

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• India received about $129 billion in remittances in 2024, accounting for roughly 14.3% of global remittance flows.
• Gulf economies account for about 38% of India's remittance inflows, with nearly half of those originating from the UAE.

Impact on Kerala's Economy and Elections

• With Kerala's economy deeply tied to remittance flows from these regions, any prolonged disruption in West Asia could affect household spending and economic sentiment in the state.
• Kerala is scheduled to vote on April 9, with results to be declared on May 4.