Why might hurt the proposed transfer tax by India

Densed in the depths of Donald Trump “One, Big Bell Work, Beautiful” It is a condition that can take quietly billions of money sent out.

He – she A 3.5 % tax suggests transfers It was sent abroad by foreign workers, including green cards and temporary visa workers such as those on H-1B visas. For India – the best transfers in the world – the effects of it are dangerous, experts say. Among the other major beneficiaries are Mexico, China, the Philippines, France, Pakistan and Bangladesh.

In 2023, the Indians abroad The house sent $ 119 billion (88 billion pounds) – It is sufficient to finance half of the commercial deficit of commodities in India and foreign direct investment, according to paper By the Indian Reserve Bank (RBI) Economists. From this, the largest share of the United States came. For millions of immigrants, this includes wire funds to cover parenting medicine or tuition fees for my nephew or a mortgage in the homeland.

A sharp tax on transfers can give up billions of migrant workers, and many of them are already paying taxes in America. Possible result? Increased unofficial cash transfers and Dent in the most stable source of external financing in India.

India has been the first in transfers since 2008, with a share of 11 % in 2001 to 14 % in 2024, according to the World Bank. The Indian Central Bank says that transfers are expected to remain strong, as it reached an estimated $ 160 billion by 2029. Transfers in the country have been constantly hovering about 3 % of GDP since 2000.

The number of international migrants in India fell from 6.6 million in 1990 to 18.5 million in 2024, as its global share increased from 4.3 % to more than 6 %. While the Gulf still hosts nearly half of the Indian immigrants, skilled immigration to advanced economies – especially the United States – has increased significantly, driven by the fingerprint of global information technology in India.

The United States remains the highest source of conversions around the world, with a share of 23.4 % in 2020-21 to nearly 28 % in 2023-24, driven by strong recovery after the wills and an increase of 6.3 % in workers born abroad in 2022. Especially 78 % of Indian immigrants to work in higher work such as management, science, and art.

The costs of transfers – driven by fees and currency transfer – have long been a global concern for politics because of its influence on families. While the global average costs are still higher than goals, India is one of the most affordable destinations, which reflects the high digital channels and the increasing competition in the market.

The decrease in transfers can cost 10-15 % from 12 to 18 billion dollars annually, which leads to tightening the dollar supply and pressure on the rupee, according to the AJAY SRIVASTAVA initiative from the World Trade Research Initiative in Delhi (GTRI). It is believed that the central bank may have to intervene often to achieve stability in the currency.

The largest strike on families in states such as Kerala, the strings of Pradesh and Bayhar will be funded, as basic transfers such as education, health care and housing are funded. Mr. Srivastava says in a note: The tax may “reach family consumption seriously” even with the wrestlers of the Indian economy with universal uncertainty and inflation.

Transfer tax can be pressed on Indian family budgets, inhibit consumption and investment, and undermines one of the most fixed sources of work in India in the field of foreign exchange, warning from the Center for World Trade Organization studies based in Delhi. Maharashtra, followed by Kerala and Tamil Nadu, is still among the dominant countries.

Transfers in India are largely used for family consumption, saving and investment in assets such as housing, gold and small companies. According to the policy brief by Think Tank, Saptarshee Mandal and Divyansh Dua.

It can reduce the decrease in local savings flows and reduce investment in both financial and material assets. When transfers drop, it is possible that “families determine the priority of consumption needs (such as food, health care and education) on savings and investment,” says the summary.

A Ticket Under the World Development Center, a Washington -based research tank, it indicates that the proposed tax may sharply reduce official transfers, as Mexico faces the largest blow – more than $ 2.6 billion annually. The other two losers include India, China, Vietnam, and many Latin American countries such as Guatemala, Dominican and Salvador.

There is certainly that there is still some confusion surrounding the tax, and the final approval is awaiting the Senate and the signature of the president.

“The tax applies to all other citizens and even the embassy and the employees of the United Nations Bank/World Bank. But those who pay taxes can claim tax credit. Therefore, the transfer tax will only apply to immigrants who do not pay taxes. This will often include unauthorized immigrants (and diplomats)”

Dr. Ratha wrote in a note on LinkedIn that the immigrants will try to reduce the costs of transfers by switching into informal methods – handcuffs, or sending money through friends, pursers, bus drivers or airline employees, or arranging local currency payments across friends in the United States, or using them Hawala, checks And encrypted currencies.

“Will the proposed tax for unauthorized migration will be received to the United States? Will you encourage unauthorized immigrants to return to the homeland?” The wonders of Dr. Ratha.

Not completely, he says. The minimum wage function in the United States earns more than $ 24,000 a year – more than four to 30 times more than many developing countries. Immigrants usually send between $ 1,800 and $ 48,000 annually, and Dr. Rata is estimated.

“The tax is unlikely to reach 3.5 % for these transfers. After all the main motivation for immigration – migrants trying to cross oceans, rivers and mountains – is to send money to the home to help the unable family members.”