Representative image (Image: Moneycontrol)
The quintessential rich businessmen shifting to a sunny Caribbean island to escape taxation in India are not the only category of extremely well-off Indians currently moving abroad, as many would believe.
The Capgemini Global Wealth Report 2020 defined High Net Worth Individuals (HNWIs) as those having investable assets of $1 million or more, excluding primary residence, collectibles, consumables, and consumer durables. The report also estimates that there are 2.63 lakh such households in India. Similarly, the latest Hurun India Wealth Report estimates as many as 4.12 lakh dollar-millionaire households.
While the estimates may differ, the broad consensus is that HNWIs are a large group and despite the vagaries of India's volatile economic growth, they continue to grow in numbers. On the other hand, the growing ease of transferring wealth across national boundaries, increasing number of choices beyond the US and Western European nations and an ever connected global economy mean that many of them are moving out.
"The flight out of india is largely driven by two considerations, one where entrepreneurs believe that there would get larger and wider pools of capital and investors for their business. This has reduced and will reduce given the recent successes of digital internet business in india and the recent IPO’s," Vikram Hosangady- Partner, KPMG India said.
The second reason is where entrepreneurs have monetised their business or large HNI families have completed settlements and the next gen wants some flexibility to live overseas and pursue personal interests, he added.
“In India, HNWIs are an extremely diverse group, encompassing various levels of wealth and social backgrounds. The only thing tying them together is a rising interest in moving abroad, a trend which has increasingly gathered pace in the past few years,” a senior functionary at a visa facilitation firm said.
Sources from across industries which help them move abroad, including business advisory firms, immigration consultants and tax lawyers, confirmed this.
“What has accelerated this trend is the enormous growth in capital and private equity markets. As these have boomed, the disposable income with many investors has also shot up,” another industry insider said.
Interestingly, they say that since India remains strict on not allowing a dual passport regime, most HNWIs are looking for residency permits or multiple entry and long-term visas, rather than all-out citizenship.
Moneycontrol takes a look at the broad groups that make up the outward-looking HNWI category.
Entrepreneurs trying to monetise business in foreign markets
A standard practice among businesses in India for many years now, entrepreneurs generally move out to better understand foreign markets before making a foray.
“It’s almost like a rite of passage. Once the business has reached critical mass, it is important to either move yourself or have someone over there to study in detail the law, culture, business models and consumer habits. Analysts and business advisors can't tell you those,” a senior industrialist leading a major engineering goods company and member of industry group CII, said.
Currently, this group also includes a lot of tech entrepreneurs who are trying to build market capabilities in the West and are trying to spend a significant chunk of every year in the US or Europe to stay close to the markets they hope to dominate soon. A case in point is OYO founder Ritesh Agarwal, who camped out in the US for months before the company was set to invest heavily into an entry there.
Startup founders, rich from IPOs, valuations or cashing out
A subset of the earlier category, startup founders or tech entrepreneurs are also heading out, buoyed by a major flood of cash as valuations soar and companies like Zomato and Paytm file for IPOs. Since startups thrive on a continuous growth model, more than traditional businesses, Indian startups have been eyeing foreign markets for years now.
But with more financial backing, they now plan to take on American, European or Malaysian startups on their home fronts. As a result, apart from the business of running the startups, sources say often the core team plan to move out to foreign markets to head critical units or teams overseas.
Also, many startup founders are now moving to the US, Western Europe, Singapore, Australia and Hong Kong, after cashing out by selling their startups. New ventures are the often quoted reason, people in the know said.
Members of business families
Major family run businesses often see a settlement as the result of a major deal, a family dispute, a stake sell-off, inheritance or rejig of ownership. This suddenly leaves a large number of people, who had till then little connection with the business, with an extremely powerful chequebook.
“This is more common than people think. Many large corporate houses in India had been till recently structured as Hindu Undivided Families (HUF) for tax purposes. Often, these families are large, with branches spreading out over the past 3-4 generations. Whenever a payout occurs, dozens of family members may suddenly be left extremely rich," a senior tax lawyer at an international advisor firm said.
For example, the Chennai-based TVS family and the Gurugram-based Munjal family of Hero Group recently had settlements and many members are currently aiming to strike out on their own in a plethora of businesses, he added. However, an equal number often want to just move abroad and take it easy for the foreseeable future.
Business owners emigrating for tax purposes
This is the category that has seen the highest number of inquiries being made for investment-based citizenship, according to immigration consultants. India remains a tough economy to save tax and continues to have stringent regulations.
However, traditional tax havens are not the main destination for these Indians. Saving tax is not the main focus, as the plan is to also have a foreign residence which can be used for a few months every year.
Apart from a liberal tax regime, they look for an easy mechanism to repatriate income, ease of doing business and minimal immigration hassles. As a result, Mediterranean destinations such as Portugal and Greece have gained credence for both having a vacation home as as well as an office away from office.
Senior management level professionals looking to tap growth
A large number of professionals still move abroad for better job growth. While information technology professionals had been the largest segment of this group for a long time, an increasing number of mid-career Indians from management, engineering, law and medical backgrounds are increasingly catching up in their desire to move abroad, sources said.
Then there is the hope to max out the pay check by finding a job abroad that pays in US dollars once people have hit their ceiling in India. Even at the senior management level, many private companies now see a flurry of people wishing to move to developed economies for better job opportunities, sources say.
Retirees looking to unite with their kids abroad
Many affluent Indians, in their senior years, are looking to move abroad, and settle down with or near their children who have already found a footing in a foreign country. This is the only group which has seen substantial growth after COVID.
The uncertainty and dread that COVID-19 has brought about has led to many retired professionals in their autumn years firming up plans to join their children abroad. The hope of accessing better healthcare facilities is also a driving factor for some of them, people in the know say.
However, only a few share that feeling as citizens of richer nations often instead come to India to get get treated at much lower costs.
The rich aiming for a better standard of living
Finally, the most obvious and yet the most ubiquitous group among all HNWIs is traditionally rich Indians, who have always had an interest to move abroad purely for a better standard of life. Ease of travel and a more connected world has now afforded them the opportunity to stay abroad for a longer period of time now.