South Asia is one of the world's great remittance corridors, with millions of workers abroad sending money home. The World Bank's 2024 data shows just how deeply the region depends on these flows.
Nepal is the extreme case: one-third of its GDP (33.1%) comes from remittances. Pakistan (9.4%), Sri Lanka (1.2%), and Bangladesh (6%) also lean heavily on earnings from their diaspora. India, despite receiving the largest absolute sum globally, registers a modest 3.5% of GDP because of the size of its economy.
The benefits are obvious. Remittances cushion families against poverty, fund education, and pay for healthcare.
They are far more stable than exports or foreign investment, often increasing when disaster strikes at home. In countries with thin financial markets, remittances serve as a kind of informal insurance system, plugging credit gaps and smoothing consumption.
But dependence comes at a cost. When remittances make up 30% of GDP, as in Nepal, they can hollow out the domestic labor market. Young people see little incentive to stay and build industries at home, and those left behind may reduce their labor participation because household income is guaranteed from abroad. Economists warn of a
"Dutch disease" effect: remittance money raises demand for non-tradable goods, inflates prices, and hurts export competitiveness. There is also the risk of conspicuous consumption, inequality, and environmental strain when remittance income is spent on cars, housing booms, or unsustainable energy use.
South Asia therefore faces a paradox. Remittances have undeniably lifted millions out of poverty, but they can also lock economies into dependence on migrant labor rather than domestic growth.