Gaurav ChoudhuryMoneycontrol
Indian individuals spending in overseas property, bank deposits, equity, travel and payments to relatives has risen sharply in the last few months, raising questions on why the wealthiest of the world’s fastest growing economy are moving billions abroad.
In the five months from April to August this year, individual remittances from India have totaled USD 3.45 billion, which is nearly twice or 94 percent greater than the amount sent during the same period last year.
Indians had sent USD 1.8 billion during April to August 2015 using the so-called Liberalised Remittance Scheme (LRS) that allows people to spend up to USD 250,000 overseas in a year through legitimate financial instruments without specific approval.
Reserve Bank of India (RBI) data collated by Moneycontrol show that overseas banks and financial institutions have emerged as favoured savings avenues for prosperous Indians this year.
Overseas deposits during April to August this year has risen 123 percent over 2015. Indians have parked USD 83 million in foreign deposits compared to USD 37.3 million during the first five months of 2015-16.
Expectations of a stronger dollar and the rise in US interest rates could have prompted this dollar flight.
US-listed company shares and debentures have found favour among India’s affluent and financially-savvy class.
Investments in equity and debt have grown 44 percent — to USD 160.3 million during the first five months of 2016-17 compared to last year’s USD 111.2 million during the same period.
This broadly coincides with the period when India firmly cemented its position as the world’s fastest growing major economy, outpacing neighbouring titan China.
During these months, Indian travel costs overseas have vaulted by an eye-popping 1516 percent — USD 69.9 million in April-August 2015 to USD 1.12 billion in the same period this year.
Oddly, foreign exchange spent on “maintenance of close relatives” has jumped 209 percent — from USD 296 million in April-August last year to USD 916 million in the first five months of the current financial year.
India also seem to be buying more houses overseas. During this period this year Indians have spent USD 44.3 million in immovable property purchases, an increase of 19 percent over USD 37.2 million during April-August last year.
Under LRS, individuals are allowed to send a certain amount of money to another country.
The amount can be invested in shares, debt instruments, and used to buy property or spent on travelling, medical treatment or on education.
Individuals can also open, maintain and hold foreign currency accounts with banks outside India for carrying out transactions permitted under the scheme.
It was raised to USD 125,000 a year in June 2014 and later doubled to USD 250,000 a year in February 2015.
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