Indian’s penchant for overseas travel shows no signs of slowing down. Even after two years since the unlocking of international borders, overseas travel and spending by Indians continue to witness robust growth month after month.
As per the latest RBI data, Indians have spent $5.5 billion on overseas travel under the RBI’s Liberalised Remittance Scheme (LRS) between April and July of the current financial year. The travel spent in the first four months was higher than what Indians spent in the whole of FY19. Indians spent $4.8 billion on overseas travel in FY19.
Under LRS, resident individuals (including minors) are allowed to remit up to $250,000 per financial year for permissible current or capital account transactions. These include remittances for overseas education, international travel, maintenance of close relatives, medical treatment, the purchase of immovable properties, investment in equity/debt, and gifts or donations.
In the first four months, Indians have spent a total of $11.5 billion abroad across various transactions. Travel spending alone accounted for 50 per cent of the total foreign spending.
Experts in the foreign exchange business say the spurt in forex spending could be due to “frontloading” of travel expenses by Indians before the new rates of tax collection at source (TCS) kicks in. According to a Finance Ministry announcement, effective October 1, outward remittances exceeding ₹7 lakh in a financial year will attract a TCS of 20 per cent. This excludes expenditure on medical and educational purposes.
Reigning revenge travel
Travel company executives also say the higher spending could be due to “revenge travel”, a term popularised to denote the pent-up travel demand after the Covid-led lockdown and consequent work from home.
From $7 billion in FY20, outward travel spending fell to $3.2 billion in FY21 due to pandemic-led travel restrictions. However, travel spending witnessed a rebound in FY21 to $7 and touched an all-time high of $14 billion in FY23. The first four months travel spend in the current fiscal year is already 40 percent of the previous year’s spending.
Maintenance of relatives and gifts are the other two areas that saw the highest spending in the current fiscal year at $2.1 billion and $1.7 billion, respectively.