The Remittances refer to the funds transferred by the migrants in foreign countries to their families, relatives or friends in the home country. They are basically the earnings of workers that are spent by their families in the home country for meeting their daily requirements for food, clothing and other expenditures. The remittances in a way are a major force in driving the economy of home country. The remittances sent by the citizens who are working abroad offers an import source of funds for many developing nations. In some cases these funds from remittances even exceed the aid received from the developed world.
The remittances received in home countries are used for meeting the expenses of the worker’s family; however it is difficult to track the expenditure as it is form of private transfers. As per the economists, recipients may use funds for buying necessities like food, clothing and housing. It does not lead to development because these are not strictly investments. Some other economists opined that funds received from abroad are used for developing the domestic financial system. The remittances can be sent via wire transfer, to banks and other financial institutions. These funds are used for the consumption of goods and services. It can also be used for other purposes like constructing house, building or any other investments.
As per the research, migrants returning from abroad invest their funds in developing their own business and they recognize the business trends in their home country and utilise their work experience abroad for creating a company in their home country. The inflow of money from remittances is compared to commodity like oil that have high demand source. Government can spend money on poorly-planned projects and get into trouble if the demand for that commodity slows down. As the remittances are not held by the government unlike oil revenues, they are sent to individuals for spending.