International economics and economic relations are becoming increasingly important fields of focus over the years and for the time to come. Economic relations is an important sub-sector to investigate, this field focuses on the consequences of economic interaction among countries. There are many forms of economic relations between two countries such as direct investment, foreign trade, foreign capital, the capitalist world, foreign exchange, trade, and International money transfer. However, in this article, we are taking a closer look at how remittance contributes to the economic relations between the two countries. Remittance can affect economic growth in individual countries as well as joint growth. There is empirical evidence that remittances contribute to economic growth through their positive impact on consumption, savings, and investment. On a contrary to that, they can also have a negative impact on growth in recipient countries by reducing incentives to work, and therefore reducing labour supply (IMF working paper -JemaDridi, TurcGumsoy, Hector Perez-Saiz and Mounir Bani).
Firstly, we take a closer look at economic relations and remittance. The United Nations Sustainable Development Goals (SDGs) identify remittance as a lifeline for many struggling families and communities in developing countries. Remittances are directly used to provide food for families, access health services and quality education, as well as clean water and sanitization. Compared to foreign aid, the household-to-household nature of remittances makes remittances an important and direct vehicle for achieving accelerated poverty reduction. There is strong and unambiguous evidence that supports the argument that remittances alleviate poverty in developing countries (world bank- April 16, 2022).
Nonetheless, we take a closer look at the growth of Malaysia’s economy and remittances. Where remittance inflows to Gross Domestic Product (GDP) percentage in Malaysia were reported at 0.4248% in 2020, according to the World Bank collection of development indicators, compiled from officially recognized sources. Malaysia’s remittance inflows to GDP -actual values, historical data, forecasts, and projections were sourced from the world bank in December 2022. Worker’s remittances and compensation of employees comprise current transfers by migrant workers and wages and salaries earned by non-resident workers (Malaysia-Remittance Inflow to GDP-Trading economies). Similarly,India is one of the largest recipients of remittance in the world and the twin shock of economic slowdown and rise in oil prices should have had a resounding impact on remittance. However, this is not the case. As per The Reserve Bank of India’s (RBI) data, India’s remittances are at the top receiving 12% of global remittances (Inward remittance-business world). Additionally, remittance accounting for 3% of India’s gross domestic productis also important for filling the fiscal graph (Bloomberg). Remittances or money transfers from migrant workers to families back home are an important source of income for households in poorer countries. They not only reduce poverty in developing nations but have also been associated with higher school enrolment rates for children in disadvantaged households (World Bank-CNN).
Furthermore, economic, and commercial relations are emerging as the mainstay of the bilateral relationship. Malaysia is the third-largest trading partner for India within ASEAN, and India is the largest trading partner for Malaysia among other countries of the south excluding China (India-Malaysia relations- Ministry of External Affairs). Evidently, India and Malaysia have traditionally been close and friendly. There have been regular summit-level exchanges and meetings between these two countries. India is represented in Malaysia through The High Commission of India based in Kuala Lumpur. Whereas Malaysia is represented in India through its High Commission in New Delhi and consulates General in Mumbai and Chennai. With such a great and close relationship from one developing country to another, remittance serves as another huge contributor to this relationship and the economy. As mentioned above Malaysia is home to many Indian expatriates who send money back home. This is where Lotus Remit comes into place. Lotus Remit is a remittance company operating to provide the best service for expatriates to send home money without any hassle. They have been assisting to send money to India with the best competitive rates possible over the years. India serves as one of the important remittance corridors according to Lotus Remit.
Conclusion
In conclusion, the economic relations between the two countries open many economic opportunities such as employment, trade, exchange, and much more. These will contribute to the economic growth of both countries. However, it is important that the government comes up with constant plans and strategies to maintain the relationship sustainably between these countries. In a larger context, the economic relations between India and Malaysia are rather significant due to all the factors stated in the article above. With that being said, it is important that both countries keep cultivating ways to sustain the relationship and improve their economic positioning and growth over the years to come.