With around ₹2.16 lakh crore in annual remittances coming primarily from the GCC countries, experts warn that long-term instability could exacerbate the impact. | Photo credit: Getty Images/iStockphoto
The West Asian crisis is expected to have a significant impact on Kerala’s economy, with experts predicting a 20% drop in remittances. The state receives annual remittances of around ₹ 2.16 crore from emigrants. Although the currency’s weakening against the dollar is expected to soften the short-term impact, the country is expected to see at least a 20% drop in remittances this year, especially if the war continues.
The latest Kerala Migration Survey (KMS), conducted by the Gulati Institute of Finance and Taxation (GIFT) with technical support from the International Institute for Migration and Development (IIMAD), pegged total remittances from emigrants at a record ₹ 2,16,893 crore in 2023, up from ₹ 85,85 to 15,092% by 1,892% despite the economic downturn due to COVID-19.
“If the situation in West Asia persists, with Iran targeting the Gulf countries across the region in retaliation for US and Israeli attacks, the immediate drop in remittances would be around 20%. This could increase further if the war escalates and continues for a longer period,” said S. Irudaya Rajan, Chairman, IIMAD.
Comparison of remittances
About 80% of Kerala’s expatriate population lives in Gulf Cooperation Council (GCC) countries, around 30 to 35 thousand people who contribute the lion’s share of Kerala’s inward remittances. On the other hand, the emigrant population in Europe and countries such as the US, UK and Canada contribute only marginally to annual remittances. In fact, a significant share of outgoing remittances flows from Kerala to these countries, estimated at ₹ 43,378.6 crore, which is about 20% of the total incoming remittances, according to the Migration Survey.
This means that any disruption to the economy of the GCC countries will directly affect Kerala’s economy, Mr. Rajan said. According to the Kerala budget document for 2026–27, the expected GSDP is ₹16.29 crore for the current fiscal year. This clearly highlights the state’s dependence on remittances from the Persian Gulf.
At the national level, Kerala’s share of inward remittances in 2023-24 was 19.7% of the total remittances of $118.7 billion (₹9.88 lakh crore), according to a Reserve Bank of India report. This is the second highest in the country after Maharashtra. Remittances earlier fell to 10.2% in 2020-21 during the height of the COVID-19 pandemic.
According to Divya Balan, an assistant professor at the Department of Social Sciences at FLAME University in Pune, the depth of the crisis will be clear in the coming days as it is too early to quantify the impact based on trends observed in just one month. However, if the war were to escalate, the drop in remittances could exceed 20%, she said. Expatriates in West Asia have already started “precautionary planning” such as sending non-earning family members back to Kerala to learn from the COVID-19 crisis. However, earning members are likely to remain there, given the difficulties with remigration issues they faced during the pandemic, she added.
According to KP Kannan, a prominent development economist, although the crisis appears severe, the initial impact of the drop in remittances would be offset by the devaluation of the currency against the dollar, which will help expats send more money to Kerala for the time being. However, the long-term impact would be there and the state will have to devise a strategy to minimize the impact of the crisis, Mr. Kannan noted.
Published – 01 Apr 2026 20:55 IST
