Economic well-being and spending behaviour of households in India: does remittances matter?

Abstract

Context: Studies on economic well-being and use of remittances are often limited to international migration and less on internal migration. But the remittances flow within and among the states of India is large and often linked to the diversity in demographic and socio-economic development. Though the issue of remittances is central to migration in India, there is no study that systematically examines the economic well-being of remittances and non-remittances households in India. Objective: The aim of this paper is to examine the economic well-being and spending behaviour of households that receive international remittances, internal remittances and do not receive any remittances in India. Data and Methods: The unit data from 64th round, schedule 10.2 of National Sample Survey 2007–2008 that covered employment, unemployment and migration particulars of 125,578 households in the country are used in the analyses. The households are classified into three groups; households receiving international remittances, domestic remittances and household did not receive any remittances based on the receipt of remittances from migrant member of the households in one year prior to survey. Economic well-being is measured by monthly per capita consumer expenditure and pattern of household spending on food, education, health and consumer durables. The state level analyses are limited to nine states of India due to limited sample size of international remittances. The average and marginal spending behaviour are compared for remittances receiving and non-remittances households. Descriptive and multivariate analyses are used to understand the differentials and determinants of economic well-being and the pattern of consumption expenditure of households. Results: The MPCE of households receiving internal remittances was 783 rupees compared to 1299 rupees for households receiving international remittances and 837 rupees for non-remittances households. The pattern is similar in seven states of India except in Uttar Pradesh and Maharashtra. The average budget share on food was 0.51 for non-remittances households, 0.53 for households receiving domestic remittances and 0.41 for households receiving international remittances. While the pattern of spending behaviour of households receiving international remittances is similar across the states, it is not same for domestic remittances. The average and marginal spending behaviour does not vary much at higher level of education of the households. At the margin, household receiving international remittances in India spent at least 59% more on health compared to 10% more among households receiving domestic remittances. Result on higher marginal budget spending of remittances household on health and consumer durables is mixed across the states. Conclusion: Though the economic conditions of households receiving domestic remittances is not necessarily better than that of non-remittances households in India, the marginal budget share on health, education and consumer durables of remittances households is higher than that of households not receiving remittances.

Keywords:

• Remittances
• economic well-being
• migration
• spending behaviour
• India

Notes

1. Urban expected wage is the product of institutionally fixed wage and the probability of finding a job.

2. The NSS adopts a multistage stratified sampling procedure covering all states and union territories in the country. Data from NSS have been extensively used for planning, programmes and research. The sampling design, sample size and other characteristics are available in national report (NSS, 2010).

3. The 19 items of expenditure are cereals and cereals product, pulses and pulses product, milk and milk product, edible oil, vegetables and fruits, egg, fish and meat, sugar, salt and spices, pan, tobacco and intoxicants, fuel and light, entertainment, personal care and effects, toilet articles and other sundry articles, consumer services and conveyances, rent, medical expenses (non-institutional), medical (institutional), educational expenditure, clothing, bedding and footwear and durable goods.