ISLAMABAD – People in Pakistan sent almost $5 billion to India last year,according to World Bank estimates, making it one of the largest sources ofremittances to the world’s second-most-populous country.

The number is astonishingly high considering direct remittances between therival countries are highly restricted.

What makes the estimate more incredible is that the World Bank says ithappens regularly and the amount sent to India is going up.

Those living in Pakistan sent $4.90 billion to India last year, $4.79billion the previous year and $4.67 billion the year before thatlink>,according to the World Bank.

Indian globe-trotters aren’t piling into Pakistan to work on code orconstruction, in fact only a few thousand Indians go to work in Pakistaneach year. The Reserve Bank of India estimates that only around $1 millionwas remitted to India from Pakistan through official channels in the yearended March 2015.

So what is going on?

The answer is part history and part mystery, says Dilip Ratha, a leadeconomist at the World Bank and a manager of its migration and remittancesdevelopment prospects group, which helped come up with the numberslink>.

The origins of all the money buzzing around the globe are hard to trace.Remittances may go through more than one country before reaching theirdestination and when money is transferred, it is recorded as if it was sentfrom the country where the intermediary bank is headquartered. So, forexample, a transfer by Citigroup Inc. customer from Milan to Mumbai wouldbe recorded as dollars moving from the U.S.

To try to trace the source of the $72 billion in remittances to India lastyearlink>,the World Bank can only make an educated guess.

“It’s an inexact science,” Mr. Ratha said. “The bilateral remittances arebasically made up according to assumptions.”

The World Bank has built a model that uses the population and origins ofimmigrants, average incomes and cost of living in each country to estimatehow remittances flow.

Pakistan is home to more than 1.4 million people who were born in India.However, these immigrants are not your traditional non-resident Indians.They are a remnant of partition when colonial India was split and millionsof people moved as they picked a country or were kicked out and displacedby violence.ADVERTISEMENT

The World Bank attributes a large slice of India’s annual remittance incometo Pakistan because there is such a large group of India-born citizensthere. The money also flows the other way, according to the bank’s model,as there are around 1.1 million Pakistan-born people living in India. TheWorld Bank estimates Pakistan received remittances of more than $2 billionfrom India.

Some readers of The Wall Street Journal who first saw these numbers in astory titled “The Difference Between Indian and Chinese Migrants,”link>wereshocked, skeptical and scared. The amounts had to be a mistake, some saidin comments, or proof that money is being sent to finance terrorism ororganized crime in Indialink>.

Mr. Ratha still stands by the bank’s best guess and says the origin of thecash is much less sinister.

The billions of dollars flying back and forth between the two countries arefrom the same place as the rest of the world’s remittances: family andfriends supporting each other across borders.

There are literally millions of family connections between the twocountries and millions of reasons a person in Pakistan might find a way toget money to relatives in India. The money could be sent for a brother inneed, a cousin’s wedding, an uncle’s funeral or even to help educate aniece.

Despite the animosity between the two countries, as well as the rules,regulations and restrictions, family and finance finds a way.

Sometimes that means using informal avenues like the hawala money transfersystem link>or arranging forthe money to be sent via a different country. Sometimes it means anenvelope of cash carried by a friend traveling to India.

“These are two big economies right next to each other. The money must beflowing,” Mr. Ratha said. “That number we put out could even be anunderestimation.”

Source: Wall Street Journal

By: Eric Bellman