April 13, 2026

Indians begin return journey from the Middle East – remittances hit

By RN Bhaskar and Sakeena Bari Sayyed
Image: CoPilot

All the grandiose plans that India has been chest-thumping about for the past decade are almost in fragments.  The ideological fervour has shown up major flaws in economic planning.  India’s finances have been battered.  And there is a great danger that India will get splintered and fragmented. The latest threat will be to India’s remittances (https://asiaconverge.com/2018/11/will-the-remittances-flow-revive/). The Gulf war will widen the fissures that have been haemorrhaging India. The impending return of NRIs in large numbers will hurt remittances, and further threaten India’s economic and political stability.

India desperately needs to rethink its options.  This is the first of a three-part series where we take a look at the dangers confronting this country.

Damned by ideology

To appreciate the crisis confronting India it is important to understand the key areas where ideology has led India astray.

  • India’s cattle slaughter laws, based primarily on ideology, has hit milk production hard. That has hurt farmers.  It has also reduced rural incomes, hence consumption.
  • India’s move to push the Hindutva agenda has made the government work hard to change the Parliament’s composition. It wants to increase the vote representation for North India and thus marginalise the South.

Remittances are crucially important

Remittances are crucial to India’s wellbeing for several reasons.

  1. India is the biggest recipient of remittances in the world.

2. FDI, or foreign direct investment, has been growing year after year – till last year. This year could see a decline.

3. Third, with FDI falling, remittances have helped India shore up forex reserves.

4. With outward FDI overtaking inbound FDI, the country has experienced a negative FDI.  That makes FDI more crucial than ever before for this country.

5. The war in the Middle East threatens to reduce India’s inward remittances.  That will worsen its balance of payments. The rise in oil and fertiliser prices globally will add to India’s woes.

Why should remittances fall?

To understand why India faces a huge crisis look at the numbers of Indians employed in the Middle East.

As can be seen, the largest number is in the UAE. This will be hit the hardest in the ensuing Gulf war (https://www.youtube.com/live/dAJ7eeaiqVU?si=sOJLDEHjsSnnqRQB) . Then come Kuwait and Bahrain.  Expect the numbers of NRIs returning to India to come primarily from these countries.  The damage to other Gulf countries will also be there.  But not to the extent that UAE, Kuwait and Bahrain will be affected. That will involve around 5 million NRIs.  The UAE is clearly under immense pressure (https://www.youtube.com/watch?v=dAJ7eeaiqVU&t=3s).

The number of people returning could be large.  The decision of Israel to target Iranian banks resulted in Iran retaliating with the bombing of all US banks.  JP Morgan, CitiBank, Stanchart, UBS and HSBC have announced closures all over the Middle East. The Dubai International Finance Centre (DIFC) is still working.  But that is because the state is paying the salaries. The fund managers have left. And most of the foreigners left behind are American Jews. They are suspected of being Israelis living in Dubai using their American passports.  Expect them to be thrown out as well.  When financial institutions close, money flows stop.  The pink slips should be going out shortly.

Then look at the source of remittances.  After USA, the source for the largest amount of inward remittances is the UAE.  That means that remittances to India could fall sharply.

Consequences

  1. India’s rupee will become weaker as it will not have enough foreign exchange left.  It will be battered by rising oil, gas and fertiliser prices.

Add to that the fall in inward  FDI, the increasing outward FDI and the loss of remittances, India will have to buy forex at higher rates.

  1. The Indians who return home will have to find alternative jobs. They will get added to the already high numbers of educated unemployed. Will India be able to do something for them quickly?  There will be even more unemployed people, thanks to AI, and the drubbing players like Oracle have received and the threat to Google in UAE (https://www.youtube.com/watch?v=VhNQ0VLVenw timeline 17:39 to 18:00). The soaring numbers of educated unemployed will exacerbate social discord.  The consequences could be painful.
  2. To create new jobs, India will need investments. The US and Europe are broke. They will not invest. Japan too has its own share of problems. The only potential investor will be China.  India needs to smoothen relations with China on a war footing. The present amendments to Press Note 3 will just not work. India cannot invite investments will automatic investments only if the investment is less than 10% of the paid up capital (https://www.pib.gov.in/PressReleasePage.aspx?PRID=2237806&reg=3&lang=2).  India needs to allow 50% at the minimum level.  What it can do is to clarify which sectors are not permitted.  Open up the other sectors, to bring in money and create new enterprises and jobs (https://youtu.be/-6ZOUSz6QlU?si=uzp5XrRFHNkAX35b).
  3. If Iran wins the war – it probably will – it will need to reconstruct its battered facilities. It will have the Hormuz funds. Work with Iran to help it out. That will bring India closer to China and Russia as well, as they have big plans to use the Chabahar port (https://bhaskarr.substack.com/p/iran-was-once-an-ugly-duckling?utm_source=publication-search). The US is a rapidly declining power. It will cease to be a world power and will remain a regional power after this war (https://www.youtube.com/watch?v=Y49qJNviSGg). The peace when it comes will be brokered by Russia and China (https://www.youtube.com/watch?v=Es4SVCVsl5s&pp=ugUHEgVlbi1VUw%3D%3D). India needs to quickly align itself to the new power triumvirate that is likely to emerge – Russia, Iran and China.
  4. The danger of not doing this could result in further strains on India’s border states – many of the workers will come from South India where resentment against any communal discord is bound to grow.

India must move quickly.  It must rethink all its options.  And this will be the theme of our next article. The third part of this series will be on solutions that India could adopt as part of its economic and social restructuring that will be needed.

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My latest podcast is on the way the UN is rapidly losing relevance. Will it get replaced, the way the League of Nations was eight decades ago? You can find it at https://youtu.be/thb-afeQzM4

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You may also like to watch my views on Republic TV, aired on 6 April 2026, on why the US is losing goodwill and clout.  You can view it at https://www.youtube.com/watch?v=Cbf1d6Zdv3k

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Then there was another 5 minute comments on Republic TV on why the 10 point agreement on the US-Israel-Iran truce was falling apart.  The views were aired on 9 April 2026.  You can find it at https://youtu.be/5m1sDERlS_Q?si=5QwMCRQNp6JR0N22

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And do watch our weekly “News Behind the News” podcasts, streamed ‘live’ every Saturday morning, at 8:15 am IST. The latest can be found at https://www.youtube.com/live/B06zvgq7qPw?si=ix-8d157BNhiqPcI

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