India is the top recipient of workers’ remittance flows; recent data indicate that the Remittances/GDP ratio has increased from 2.7% in 2000 to 3.36% in 2015. We apply a consumption behavior model, based on the “permanent income hypothesis”, to estimate the consumption augmentation and the stability impact for the period of 1989-2014. The independent variables are: (i) real per capita income (exclusive of remittances) is the measure of “permanent income”, (ii) remittances is the measure of “transitory income”, and (iii) real interest rate as the indicator of consumers’ ability for intertemporal consumption. The economic ramifications are important since current global risk factors could decrease flows in the future. The results indicate the significance of all three variables; there are: (i) evidence of significant consumption augmentation, (ii) consumption responds higher to remittances than to real income, the remittance elasticity is 0.571 and the income elasticity is 0.31, and (iii) evidence of pro-cyclical effect. The VAR model indicates some linkages and causality in the series that result in small response to the shocks. Policies to increase or stabilize remittance flows and to leverage remittances for economic development are important.

1. Introduction
 2. Relevant Literature: Permanent IncomeHypothesis and Consumption
 3. Empirical Studies of the PIH
 4. Studies of Remittances andConsumption Stability
 5. Flows to India
 6. Studies of the Impact of Remittances in India
 7. Data Sources and DistributionalProperties
  7.1. Descriptive Statistics
  7.2. Test of Unit Root
  7.3. Test of Cointegration
 8. Model Specification
 9. Analysis of Regression Results
 10. Dynamic Models: VAR and IRF
  10.1. VAR Estimates
  10.2. Impulse Response Function
 11. Summary and Conclusion
 References

• Harridutt Ramcharran(Professor of Finance and International Business, Department of Finance, College of Business Administration, The University of Akron, United States) Corresponding Author