Indians are now spending more money abroad, with figures released by the Reserve Bank of India showing that outward remittances under the Liberalised Remittances Scheme (LRS) have surged by close to 200% in fiscal 2015-16.
Remittances for students studying abroad have hit a record high of $1 billion in the last nine months.
Indian residents have sent $3.81 billion out of the country in the first 11 months of fiscal 2015-16, which is almost 187% more than $1.32 billion outward remittances in 2014-15, according to RBI figures. On an average, remittances now amount to over $400 million every month. The full fiscal outflow is expected to cross $4 billion, or over Rs 26,000 crore.
The LRS allows Indian residents to acquire and hold shares, debt instruments or other assets outside India without prior approval of the RBI. They can take out a maximum of $250,000 per individual annually. The monthly remittances in 2015-16 have exceeded the full fiscal outflow of $440 million in the year 2007-08.
According to the RBI, remittances under the head ‘maintenance of close relatives’ and ‘studies abroad’ have risen sharply in the last nine months. While student remittances were a meagre $10.1 million in April, the outflow touched a high of $213 million in January. Students remittances had touched $1 billion in the last eight-nine months. It is estimated that close to three lakh Indian students go abroad every year for studies, with the US remaining the preferred destination.
Kiran Shetty, regional vice-president and managing director, South Asia, Western Union, said, “One of the many reasons for an increase in outward remittances is definitely because more and more students are going abroad to pursue higher education and relatives maintaining them overseas by sending money. The government’s move to raise the permissible limit on outward remittances from $125,000 to $250,000 (with further allowances for education and medical expenses) has additionally allowed people to remit outward more through the organised channels for that purpose.”
With a rise in foreign exchange reserves, the government and the central bank has also allowed people to start investing outside for business and other purposes. “This too has added to the flow of outward remittances. We also can attribute the increase in outward remittances to blue collared workers in India who send money home — to Nepal and Bangladesh. Due to these factors, we see this trend positively moving forward,” Shetty said.
The RBI had in August 2013 reduced the ceiling from $200,000 to $75,000 per person in a year under the LRS because of a wide current account deficit and a volatile rupee. Later after, after an improvement in macro economic indicators, the ceiling was raised to $1,25,000 in June 2014. With foreign exchange reserves touching record levels, the RBI doubled the annual overseas investment ceiling for individuals to $2,50,000 in February 2015. However, the RBI is comfortably placed to meet all foreign exchange requirements. India’s foreign exchange reserves hit a record level of $359.91 billion as on April 8, data from RBI shows.