Why are Resident Indians Remitting More Money Abroad Than Ever Before?

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Resident Indians remitted out more money than ever in July under LRS

By comparison, in the five year period of UPA II, between April 2009 and March 2014, the aggregate outward remittance under LRS amounted to $5.45 billion.

Sandeep Singh

The outflow of funds by resident Indians under LRS over the last five years has almost negated the inflow of funds by FPIs in the same period.

Amid the government’s efforts to attract foreign direct investors as well as foreign portfolio investors (FPIs), the country witnessed its highest ever monthly outflow of $1.69 billion under the liberalised remittance scheme (LRS) by resident Indians in the month of July.

With this, the outflow of money under the LRS scheme has hit $5.8 billion in the first four months of FY20 and aggregated to over $45 billion (Rs 3.15 lakh crore at exchange rate of 70 to a dollar) since the Narendra Modi-led NDA first came to power in May 2014.

By comparison, in the five year period of UPA II, between April 2009 and March 2014, the aggregate outward remittance under LRS amounted to $5.45 billion.

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Under the Reserve Bank of India’s (RBI) LRS, resident individuals are allowed to remit up to $250,000 in a financial year under various heads including current account transactions such as going overseas on employment, studies overseas, emigration, maintenance of close relatives, medical treatment among others.

The residents can also transfer money for capital account transactions under LRS including opening of foreign currency account overseas with a bank, purchase of property and making investments in units of mutual funds, venture capital funds among others.

RBI data shows that over the last five years, while outward remittance under LRS on account of travel amounted to over $14 billion, almost $10.5 billion was on account of maintenance of close relatives and $10 billion was sent for studies. Another $4.8 billion was remitted under the head of gifts and $1.9 billion for overseas investment in equity and debt.

By comparison, in the previous five-year period between FY10 and FY14, the amount remitted by Indians abroad on account of travel amounted to mere $129 million and that for maintenance of close relatives stood at $992 million. Similarly, for the purpose of gift, resident Indians remitted $1.17 billion in the five-year period.

The outflow of funds by resident Indians under LRS over the last five years has almost negated the inflow of funds by FPIs in the same period.

While FPI’s have invested a net of Rs 176,212 crore into Indian equities since April 2014, they have invested a net of Rs 260,017 crore into the debt market in the same period.