Monday, May 2, 2011

Indian Diaspora in GCC countries: The case of Kerala

[Paper published in the Journal of Politics & Society, University of Kerala, Vol 6, No.2, March 2011]

Introduction

Migration is an inevitable tendency in humans, and it gives birth to diaspora community. «Diaspora» a Greek word meaning ‘dispersion’, refers to the various Jewish communities «living in exile outside Palestine». The term diaspora is now commonly used in a generic sense for communities of migrants living or settled permanently in other countries, aware of its origin and identity and maintaining varying degrees of linkages with the mother country. The Indian diaspora - perhaps the oldest diaspora in the world, third largest (20 million), spread in 110 countries of the world. The Indian diaspora has some 20 million people worldwide who generate an annual income equal to 35 percent of India's gross domestic product.

Indians in the Gulf Countries
 
The Gulf Cooperative Council (G.C.C.) states include Saudi Arabia, the United Arab Emirates (UAE), Kuwait, Bahrain, Qatar and Oman. There is a huge population of Indians in the GCC countries. Most of the Indian diaspora moved to the Gulf after the oil boom in 1970s to work as labourers and for clerical jobs. One of the major reasons why Indians like to work in the Gulf is because it provides incomes many times over for the same type of job back in India and its geographical proximity to India. The Indian Diaspora makes up a good proportion of the working class in the GCC countries. The NRI population in these Gulf Cooperation Council countries is estimated to be around 6 million (2008-2009), of which over 2,500,000 stay in the UAE. Majority of them originate from Kerala, Andhra Pradesh, Karnataka and Tamil Nadu. Their numbers make impressive reading even in terms of their percentage of total population in the countries where they reside: Country - percentage of national population (1999) , Bahrain - 20% ; Kuwait - 13%; Oman - 15%; Qatar - 24%; Saudi Arabia -7% UAE -32%. However these figures are increasing day by day. For example, in 2005, about 40% of the population in the UAE were of Indian descent. This NRI population tends to save and remit considerable amount to their dependents in India .
 
Gulf: The case of Kerala

The overseas Indian workers (OIWs) in the GCC Countries come mainly from the four states of Kerala, Tamil Nadu, Karnataka and Andhra Pradesh. However, most of them have originated from Kerala. This had led to the establishment of a separate ministry for non–resident Keralites, and an international airport at Thiruvananthapuram. Compared to all India, Kerala contributed an average of 25 per cent of emigrants in 21st century, down from an average of 35 percent in the twentieth century. In other words, one out of every three or four Indians living in Gulf has been a Keralite. Towards the end of the nineties, Keralites working abroad constituted 10 percent of the workforce in Kerala. The size of those working abroad now equals those working in the organized sector (both public and private) in Kerala. According to unofficial estimates, nearly 20 lakh people from Kerala are currently working in various West Asian and North African countries .

The 2001 census put Kerala's population at 31.8 million. Non-resident Keralites (NRKs) send back close to US$8 billion in remittances annually, more than double the state's tax revenues. Migration has provided the single most dynamic factor in the otherwise dismal scenario of Kerala in the last quarter of the twentieth century. In Kerala, migration must have contributed more to poverty alleviation than any other factor including agrarian reforms, trade union activities and social welfare legislation . One important negative effect has been the rise in unemployment rate due to education and «replacement migration» into Kerala from other Indian states. Emigration had a role in increasing the population with higher levels of education by boosting the willingness and the ability of the Keralite youth to acquire more education. Due to demonstration effect, a common aspiration is «to emigrate to the Gulf, earn a lot of money, get married, and live happily ever after». In recent years, many countries in the Gulf have made it mandatory to have secondary level education for migrants to enter. This has led to considerable increase in the demand for secondary level education in Kerala.


Kerala’s share in attracting remittances from overseas Indian workers has not been insignificant. A study conducted in 2003 has estimated the total remittances to Kerala households based on their survey carried out in 1998 in each of the districts. According to their estimates, total remittances to Kerala stood at Rs. 35,304 million, representing an average remittance of Rs 25,000 per emigrant, and a per capita receipt of Rs. 1,105 by the state population. As a rough proportion of Kerala’s State Domestic product, this was close to 10 percent. They also constituted about 10 percent of the country’s aggregate remittances of US$12,000 million in 1998 at an exchange rate of approximately Rs. 33 to a dollar. Remittance flows to India are estimated to have reached $50 billion in 2010, compared to earlier estimates of $30 billion.

About two million people from Kerala work abroad, almost 90% of whom are in the Gulf states. Many are poor, semi-skilled labourers who have taken loans of up to £2,000, often from moneylenders, to pay recruitment agents for overseas jobs. They work 12-hour days, live without their families in harsh conditions, earn between £500-£1,000 a month, and send most of the money home. According to Pravasi Bandhu Welfare Trust, a UAE-based charitable organization working for the welfare of expatriate Indians, NRKs have remitted more than US$42 billion to Kerala in the last 35 years. Weekly newsmagazine India Today reports that non-resident external deposits with Kerala banks, which were US$6.73 billion in June 2008, are expected to cross US$8.39 billion by the end of 2010 . The remittance income from abroad to the Kerala economy is of two types: (i) remittances through legal channels, and (ii) remittances through illegal channels. However, the incentive to send money through illegal channels seems to have reduced with the liberalisation of the exchange rate since 1991. It is now widely acknowledged that foreign remittances in the economy of the State of Kerala in India in the form of money sent by its workers in the Gulf countries play a crucial role. By the early nineties remittances to the Kerala economy assumed a significant share of state income. This ranged from 17 percent during 1991-92 and 24 percent during 1997-98 with an average of 22 percent for the second half of the nineties. The liberalisation of the Indian economic policies, particularly the foreign exchange rate, benefited Kerala directly. Adding the remittance income to the Net State Domestic Product, a Modified State Income series has been constructed. As a result Kerala’s per capita income not only caught up with the average per capita income for India but started exceeding it reaching 49 percent above the national average by the end of the nineties. This tallies with per capita consumer expenditure in Kerala, which was in excess of 41 percent above the national average by the end of the nineties.

Remittances have also made significant impact on savings. By the nineties savings rates in the Kerala economy seem to have reached such high levels comparable to the East and South East Asian countries . Average propensity to consume declined as income increased steadily. This helped the savings rate to increase and reach high levels comparable to East and South East Asian countries during the nineties. The challenge before Kerala now is to translate such high rates of savings (also reflected in high growth rates in bank deposits and a low credit-deposit ratio of around 40 percent) into investment so as to accelerate not merely aggregate growth of the economy but more importantly, in employment growth. While there are signs of some decline in unemployment in Kerala during the nineties, the rate of unemployment is still high compared to the national average. Majority of the unemployed in Kerala are of the educated kind and this poses both an opportunity as well as a challenge to the Kerala society.


The increase in per capita income as a result of remittances helped increase the consumption of the people in Kerala, including on enhanced family investment in education for migration. The average per capita consumer expenditure in Kerala was below the national average till 1977-78. Since then per capita consumer expenditure in Kerala exceeded that of India progressively reaching 41 percent above the national average in 1999-00. Kerala’s modified per capita income (PMSI) caught up with that of the national average only in 1984-85 but reached 49 percent above the national average in 1999-00. The delay in catching up with the national average in per capita income might be a reflection of the remittances through illegal channels. However, consumerism and house building activities have drained the state of the development potential of its remittance receipts, leading many families to financial bankruptcy, even to suicides. Apart from this, the increasing economic and political clout of the «new rich» in Kerala is reported to have created a climate of resentment against them among the other sections of society .

Reverse Exodus of the Diaspora

In 2009, the number of Indian workers in the GCC countries reached a high of 6 million. Of those about 60 per cent worked in the construction field. It is estimated that more than 2,00,000 workers in the Gulf have returned to India as a result of the delay in execution of projects due to international economic slowdown and recession. Indian professionals in the western countries like Germany, Canada and Britain have not shown any such trend of mass home return, despite these economies going into recession. The World Bank estimates that the biggest declines in the flow of migrant money in 2010-2011 are expected in the Middle East and North Africa because of economic slowdowns in the Gulf and Europe.

Several of these workers have returned to India only temporarily, that is, on leave without pay and expect to go back once the economy revives and projects restarted. At the same time, Many other workers in GCC countries return to India on cancelled visas or after finishing their jobs, not those on leave. The Minister of Overseas Indian Affairs, Mr. Vayalar Ravi, said in the Indian parliament that until 2007, 50,000 to 150,000 workers returned annually to India from Gulf countries after completing their contracts, which run from three to five years. The workers in the United Arab Emirates seemed to be most affected. The Indian embassy in the UAE could not give precise figures of returnees, but indicated that the number was very large. The most visible impact on the construction industry appears to be in the emirate of Dubai. The job opportunities in Dubai were primarily in construction, while in the other countries and emirates, the job opportunities were more broad-based, covering wider spectrum of industry, including oil and gas and related ancillaries. In 2009, Proleads, a Dubai based property consultancy, estimated that 45 per cent of the country’s building projects had been delayed. Companies cut jobs, particularly in the real estate sector, which had been booming to the tune of around $2 trillion till recent times. With the global financial crisis sparked by the credit crunch in the West having reduced fuel demand, oil prices have fallen to below $35 a barrel. This after oil prices touched highs of over $140 a barrel in 2008 .

The union ministry for Over seas Indian Affairs has sought the states to furnish details of those retuned from Gulf countries due to financial recession. The information is being collected as part of conducting study to found out how much the recession affected the returnees. The Indian Council of Overseas Employments (ICOE) has the responsibility of the study . Some 200,000 to 500,000 Keralites working in the Gulf are likely to return home by July 2009, state finance minister Dr. T.M. Thomas Isaac told the State Assembly . This is a considerable chunk of the estimated two million-plus Keralites working abroad, nearly 90% of them in the Gulf. The 2001 census put Kerala's population at 31.8 million. Non-resident Keralites (NRKs) send back close to US$8 billion in remittances annually, more than double the state's tax revenues. The impact of the reverse exodus - both economically and socially - could be devastating, according to experts. According to the Centre for Developmental Studies, Thiruvananthapuram, the number of emigrants from Kerala in 2008 was 2.16 million, up from 1.84 million in 2003. The number of return emigrants was 1.1 million in 2008, up from 890,000 in 2003. So return emigration rose 210,000. Fore example, Around 1,500 to 2,000 fishermen from the Kerala Taluk, Sakthikulangara were employed in prestigious sea reclamation projects in the UAE, such as Palm Island, Due to the recession, almost 90% are back .

However, the government’s biggest problem in fleshing out the fund is that there is no official estimate of how many people are returning every week. Though the government has a separate department to cater to these NRKs (NORKA), it has only a vague idea about the numbers returning from the Gulf . The International Labour Organisation, a specialised agency of the United Nations that deals with labour issues, is likely to send a fact-finding mission to Thrissur in Kerala to assess the number of jobless returnees from abroad and the impact of the global economic downturn on NRI remittances. Thrissur has been one of the districts to immediately launch an NRI returnees rehabilitation programme as recession began affecting jobs. About 700 returnees have registered their names with the rehabilitation cell. Migrants from Thrissur district constitute 9.7 per cent of the total number in the State, according to 2004 figures. Every 100 households in Thrissur have 27 migrants and 13 returnees . About 88 per cent of the emigrants are less than 40 years.

No fiscal help is being offered to those returning to India, although the government is considering a proposal to establish an aid fund. A separate programme helping former expatriates to transfer their skills to jobs that may be available in India. The ministry of Overseas Indian Affairs was expecting a budgetary support of Rs.100 crore for setting up a fund for returning Indian workers but the request could not be accommodated in the union budgets of 2009 & 2010.
Kerala, the home state of many expatriate workers, has set up a loan package to help returnees start small businesses from their homes. Kerala Finance Minister Dr. T.M. Thomas Isaac has said that the State government will examine the possibility of setting up a financial mechanism for providing loans to the gulf returnees interest-free for starting their own employment ventures along the ‘Islamic banking’ principles. The state budget, 2009 allotted Rs. 100 crore. for providing soft loans to Gulf returnees. The state-owned Kerala Financial Corporation (KFC) will handle the package for Gulf returnees. The KFC will provide entrepreneurial loans at a low interest rate of seven per cent to those returning from the Gulf countries after losing job in the wake of the ongoing economic slowdown. The target is to provide Rs 100 crore under the scheme. KFC will evolve a mechanism to impart technical and managerial skills to such Gulf returning entrepreneurs. The corporation has already constituted to an expert team for the purpose at an informal level . The state of Kerala has also sought the Gulf Cooperation Council's (GCC) help to rehabilitate thousands of Gulf returnees, who lost their jobs in the wake of the global slowdown, by contributing to the fund which the state government has already set up.
Conclusion

India has drawn disproportionately high worldwide attention to the success stories of its highly skilled human resources doing remarkably well in the developed countries. In contrast, the Indian labour diaspora in the Gulf have been considered more of a responsibility than pride for India. To neutralise this imbalance and empower the Indian labour migrants, the interest of the stakeholders in the Gulf are gradually being looked into, and innovative programmes are being introduced. The developments following the institution of the «Pravasi Bhartiya Divas» (Expatriate Indians Day), constitution of a separate ministry of the government of India, and the steps to give franchisee right to NRIs reflect a break from the past – a confidence emanating from a paradigm shift towards India taking pride in its diaspora, and vice–versa. What is required, however, is a long–term policy that is aimed at establishing India’s links with the Indian diaspora for sustainable socio–economic development in the country. An effective mechanism is required to cater to the rehabilitation of the gulf returnees also.


Reference
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  12. The Guardian, Monday 6 April 2009, http://www.guardian.co.uk/world/2009/apr/06/ 
  13. Business Standard Monday, Jul 06, 2009, http://www.business-standard.com/india/news/kerala 
  14. The Hindu, Saturday, May 30, 2009, http://www.hindu.com/2009/05/30/stories/
  15. http://keralaassembly.org/budget/highlights2009-10.html
  16. The Hindu business line, Thursday, Jun 04, 2009
  17. Malayala Manorama, Wednesday, July 22, 2009
 

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