Indian foreign spending skyrockets 29-fold in a decade
Over the past decade, Indian expenditures on foreign exchange have surged dramatically, increasing from $1.1 bn in FY14 to $31.7 bn in FY24, driven largely by travel expenses. In contrast, remittances from overseas workers into India grew by 71%, ...
By ET Online | Updated:
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Over the past decade, the rise in foreign exchange expenditures by Indians has significantly exceeded the growth in remittances from overseas workers coming into India.
Money spent abroad has gone up nearly 29 times - from $1.1 billion in FY14 to $31.7 billion in FY24 - largely due to travel. The amount sent home by foreign workers has gone up 71% from $70 billion to $120 billion over the same period. India continues to be the highest recipient of foreign remittances, getting nearly twice the amount received by Mexico at $66 billion.
According to a report by the Bank of Baroda, money flowing into India has increased at a CAGR of 5.5% over the last decade - higher than the global growth rate of 4%. Only Mexico, at 10%, has grown its inward remittances at a faster decadal CAGR than India, which has helped it overtake China to claim the second place.
"From just $1.1 billion in FY14, remittance outflows increased to $31.7 billion in FY24. This translates into a CAGR of over 40%, which is much higher than the CAGR of remittance inflows in the same period," said Aditi Gupta, an economist with BoB.
Gupta says, the rise of an aspiring middle-class has ensured that discretionary spending of households goes up, which is reflected in higher travel expenses to foreign countries. In 2024, BoB expects inflows to continue to grow.
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Global growth is expected to gradually improve, with the US expected to remain resilient. Labour markets in the US, UK and Eurozone remain robust with unemployment rates near record lows, which bodes well for inward remittances. Further, while there seems to be some slowdown in remittance inflows from the Gulf Cooperation Countries (GCCs), stable oil prices should help in reviving inflows from the region, the report added.
In terms of sources of remittance inflows globally, the US is the largest source of remittances to the world, accounting for over 25% of total remittance inflows in the world in 2021. This was followed by the GCCs at 17%. Apart from these, Germany, the UK and Russia are also important contributors to global remittance flows.
Moving abroad? 6 financial must-dos before boarding your flight
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When relocating overseas, ensuring the smooth continuation of your financial and banking transactions in India is crucial. Whether you're a student or a professional, understanding how to manage your banking operations can streamline your financial affairs and provide peace of mind while abroad.
Here are the top seven banking and financial tasks to address before departing for overseas:
When relocating overseas, ensuring the smooth continuation of your financial and banking transactions in India is crucial. Whether you're a student or a professional, understanding how to manage your..
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When you relocate overseas, your residential status changes to that of a Non-Resident Indian (NRI). According to prevailing regulations under the Foreign Exchange Management Act (FEMA), NRIs are required to either:
- Close their existing resident savings account in India and open a new NRI account, or - Convert their resident savings account to a Non-Resident Ordinary (NRO) account.
When you relocate overseas, your residential status changes to that of a Non-Resident Indian (NRI). According to prevailing regulations under the Foreign Exchange Management Act (FEMA), NRIs are requ..
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As an NRI, you have several options for banking accounts tailored to your needs. These include:
A. Non-Resident Ordinary (NRO) Account: - Denominated in Indian Rupees. - Suitable for managing income earned in India to cover expenses within the country. - Allows deposits of earnings generated in India, such as rental income, dividend payments, pension funds, gifts, and proceeds from the sale of property located in India.
B. Non-Resident External (NRE) Account: - Also denominated in Indian Rupees. - Ideal for depositing funds earned abroad. - Offers the freedom to repatriate funds to your overseas account without any limitations. - Interest earned in this account is tax-free in India.
C. Foreign Currency Non-Resident Bank (FCNR (B)) Account: - Allows you to maintain a Fixed Deposit (FD) in India in a foreign currency. - FD tenure ranges from one to five years. - Funds and interest earned are tax-free in India. - Offers seamless fund transfer between your NRE account and FCNR (B) account.
As an NRI, you have several options for banking accounts tailored to your needs. These include:A. Non-Resident Ordinary (NRO) Account:- Denominated in Indian Rupees.- Suitable for managing income ear..
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Some Indian banks, through their overseas subsidiaries, provide the option to open an international bank account from India. This allows you to access foreign currency as soon as you arrive abroad, saving you from forex conversion fees typically incurred when using Indian debit/credit cards internationally.
You can transfer funds from your resident savings account to this international bank account before relocating overseas. However, all credits to your international bank account from India must comply with prevailing regulations under the Foreign Exchange Management Act (FEMA) and the outward remittance limits defined by the Liberalised Remittance Scheme (LRS).
These international bank accounts are tailored to specific countries and are maintained in the local currency of your destination. For instance, ICICI Bank UK offers the HomeVantage current account for residents of the United Kingdom, while ICICI Bank Canada provides Hello Canada accounts for residents and Student GIC accounts for Indian students. These accounts can be conveniently opened from India through the digital channels of ICICI UK PLC and ICICI Bank Canada.
Additionally, students and parents can access valuable resources through ICICI Bank Campus Power, offering comprehensive insights into pursuing higher education both in India and abroad.
Some Indian banks, through their overseas subsidiaries, provide the option to open an international bank account from India. This allows you to access foreign currency as soon as you arrive abroad, s..
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Before embarking on your journey overseas, it's advisable to appoint a Power of Attorney (PoA) or designate a mandate holder to oversee your financial and banking affairs in India. Both options empower a trusted individual to act on your behalf, ensuring continuity and efficiency in managing your financial matters while you're abroad.
A mandate holder is authorized to operate your bank account and make investments on your behalf within India. This arrangement grants them specific powers tailored to managing your financial transactions effectively.
On the other hand, a Power of Attorney (PoA) offers a broader scope of authority, allowing the appointed individual to handle a wider range of matters beyond just financial transactions. This could include legal, administrative, or property-related tasks, depending on the terms outlined in the PoA document.
Choosing between a mandate holder and a PoA depends on your specific needs and preferences. Regardless of the option you select, entrusting someone with these responsibilities ensures that your financial affairs remain well-managed and secure while you're residing overseas.
Before embarking on your journey overseas, it's advisable to appoint a Power of Attorney (PoA) or designate a mandate holder to oversee your financial and banking affairs in India. Both options empow..
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Reviewing your investment portfolio before relocating overseas is crucial to ensure effective management of your assets. Here's a comprehensive guide to navigating this process:
1. Evaluate Existing Investments: Assess the assets and investments you currently hold in India, including Mutual Funds (MFs), shares, Public Provident Fund (PPF), etc. Consider whether managing these investments from abroad aligns with your long-term financial goals.
2. Inform Financial Institutions: Once your residency status changes to an NRI, notify your bank, broking house, Asset Management Companies (AMCs), insurance provider, etc., about the change. Update your Know Your Customer (KYC) details to reflect your NRI status accurately.
3. Mutual Funds (MFs): You can retain your existing MF units but must route your Systematic Investment Plans (SIPs) through your NRE/NRO accounts.
4. Stock Market Investments: Close your resident demat account and open a new NRE/NRO demat account under the Portfolio Investment NRI Scheme (PINS) to continue investing in the stock market. Transfer all securities held in your resident demat account to your NRI demat account.
5. PPF and NSC Accounts: You can maintain and make fresh investments in existing PPF or National Savings Certificate (NSC) accounts until maturity, but on a non-repatriable basis. However, you cannot open new PPF/NSC accounts as an NRI.
6. National Pension Scheme (NPS): Make fresh investments only in NPS Tier I accounts, not in Tier II. Update bank account details to link it with your newly opened NRE/NRO account if necessary.
7. Tax Implications: While you can continue holding your investments, be aware that capital gains earned on them may be taxable in India. Familiarize yourself with the tax regulations applicable to NRIs to avoid any compliance issues.
Reviewing your investment portfolio before relocating overseas is crucial to ensure effective management of your assets. Here's a comprehensive guide to navigating this process:1. Evaluate Existing I..
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Ensuring compliance with your tax obligations before relocating overseas is essential to avoid any legal issues. Follow these steps to streamline the process:
1. Submit Form 30C and Essential Documents: Prior to your move, submit Form 30C along with essential documents such as your PAN card to the Income Tax (IT) department. This form notifies the IT department about your impending relocation and serves as a declaration of your intent to fulfill your tax obligations.
2. Request Tax Clearance Acknowledgement: Upon submission of Form 30C, request an acknowledgement from the IT department for tax clearance. This acknowledgment confirms that you have notified the authorities about your move and are committed to fulfilling your tax responsibilities.
3. Apply for Income Tax Clearance Certificate (ITCC): Depending on the regulations and requirements, the IT department may instruct you to apply for an Income Tax Clearance Certificate (ITCC). If instructed, diligently complete the application process for the ITCC as per the guidelines provided by the IT department.
4. Retain Original ITCC: Upon receiving the ITCC, ensure to keep the original document safely. The ITCC serves as official documentation of your tax compliance status and may be required for various purposes during your relocation and stay abroad.
5. Carry Acknowledgment or ITCC: When relocating overseas, carry the acknowledgement of Form 30C or the ITCC with you. These documents serve as proof of your tax compliance status and may be requested by authorities during immigration or other administrative procedures.
Ensuring compliance with your tax obligations before relocating overseas is essential to avoid any legal issues. Follow these steps to streamline the process:1. Submit Form 30C and Essential Document..
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Re-assessing your insurance plans is crucial when transitioning to non-resident status abroad. Here's what you need to consider:
Inform Insurance Provider: Notify your insurance provider about your change in residential status to non-resident. Update your bank account information using the designated service channels provided by the insurer. Submission of required documents will be necessary for a seamless transition.
Review Health Insurance: As an NRI, review the geographical coverage and nationality requirements of your health insurance policies. Some plans may only cover medical expenses within India or exclusively for Indian residents. Look for premium-level plans that offer global coverage, with specific conditions and exclusions for certain treatments.
General Insurance Policies: You can maintain general insurance policies such as motor insurance without difficulty. These policies provide coverage in India for unexpected damages and incidents.
Lapsed Policies: Be aware that lapsed policies are subject to the terms and conditions of the insurance contract and the underwriting guidelines of the insurance company. As an NRI, you have the option to reinstate lapsed insurance policies, but it's essential to understand the process and any associated costs.
Review Terms and Conditions: Carefully review the terms and conditions of your insurance policies. Seek guidance from your insurance provider to clarify geographical coverage and any limitations that may apply when transitioning to non-resident status.
By reassessing your insurance plans and understanding the implications of your non-resident status, you can ensure that your coverage aligns with your needs and circumstances abroad. Stay informed and proactive to safeguard your financial and health security while living overseas.
Re-assessing your insurance plans is crucial when transitioning to non-resident status abroad. Here's what you need to consider:Inform Insurance Provider: Notify your insurance provider about your ch..
