Indians are remitting more money abroad for both personal expenses as well as investments. Outward remittances by resident Indians under the liberalised remittance scheme (LRS) have risen 34 per cent sequentially since October with outflows for family maintenance and education as well investments in equities and deposits picking up.

“In the lockdown-induced slowdown phase, while the overall economy was blunted, the HNI segment wealth was relatively less impacted,” said Joydeep Sen, a consultant at Phillip Capital. “The stock market volatility was over by 23 March 2020. Now that the economy is looking upward and the stock market is near all-time high, people are stepping up discretionary (lifestyle) expenses and capital remittances for diversification of portfolio.”

Indians sent abroad $1.2 billion in January under LRS, up 34per cent sequentially since October during which they remitted abroad only $938 million

Under the LRS all resident individuals, including minors, are allowed to freely remit up to $ 2,50,000 per financial year (April – March) for any permissible current or capital account transaction or a combination of both. These includes capital account transactions such as investment in debt/equity instruments, deposits and purchase of property. It also includes most current account transactions like expenses for travel, studies, maintenance of relatives, gifts and donation.

Though overall remittances are still at one third less than $1.8 billion sent in January of 2020, the pandemic induced lockdown globally had slowed down such outflows significantly. But they have started picking up since October.

Notably, capital account transactions like investment in deposits and debt and equity instruments are picking up though have a small base. Deposits almost doubled from $23 million October to $ 41 million in January. Investments in debt and equity instruments $23 million to $35 million in the same period. Significantly January investments in debt and equity was 33 per cent higher than same period a year ago.

In addition, regularly strong components of LRS- remittance for travel( $357 million in January) and studies abroad($455 million in January), which together account for half the outward remittances under LRS- also rose sequentially by over 30 per cent since October.

Regulators are unlikely to dsicourage such outward remittances as foreign exchange reserves are plentiful at $ 582 billion as of March,12 “With a growing economy (2020-21 was an aberration), flourishing middle and affluent classes and all time high forex reserves, LRS is expected to remain buoyant,” he said.

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