Economy

Outward remittance takes a hit in FY21

NARAYANAN V Chennai | Updated on April 12, 2021

After a record surge of $18.76 billion in FY20, money transfers nosedive, thanks to the Covid-19 induced lull

After hitting a record high of $18.76 billion in FY20, outward remittance of resident Indians under the liberalised remittance scheme (LRS) nearly halved in the first ten months of FY21, bogged down by Covid-19 impact on two major spenders — overseas travellers and Indian students studying abroad.

According to RBI data, outward remittance of Indian residents under LRS fell to $9.98 billion between April 2020 and January 2021 when compared to $15.72 billion between April 2019 and January 2020.

Under the liberalised remittance scheme, RBI allows resident individuals to remit up to $250,000 in a financial year for current account transactions such as private visit, gift or donation, going abroad on employment; emigration; maintenance of close relatives abroad; business trip; medical treatment abroad and overseas educational expenses.

The residents are also allowed to transfer money under LRS for capital account transactions such as opening of foreign currency account abroad with a bank, purchase of property and making investments in units of mutual funds, venture capital funds and extending loans including in Indian rupees to Non-resident Indians (NRIs) relatives, as defined under the Companies Act 2013.

 

Outward remittance

Outward remittance under the LRS route has been steadily growing over the last few years. From a mere $1.33 billion in FY15, remittances under LRS jumped more than ten times to $13.79 billion in FY19. It touched a high of $18.76 billion in FY20.

In FY20, travel accounted for the highest share of remittances at $6.94 billion followed by studies abroad ($4.99 billion), maintenance of close relatives ($3.44 billion) and gift ($1.91 billion). These four categories alone collectively contributed for 92 per cent of the total outward remittances in FY20.

However, with Covid-19 pandemic wreaking havoc on overseas travel and education plans of Indians in FY21, outward remittances under these categories also fell drastically.

Remittances for travel fell to $2.59 billion in the first 10 months of FY21 as against $6.11 billion in the corresponding period in the previous year. Similarly, remittances for ‘Studies Abroad’ fell to $3.06 billion ($4.18 billion).

Saving grace

Interestingly, remittances towards ‘Deposits’ is the only category to grow to $489 million ($460 million) during April-January FY21. Investment in equity/debt marginally fell to $341 million ($352 million) during the period.

“Indian HNIs have shown a huge interest in investing overseas, especially in the US and the European countries. With most global companies looking to list in the US stock exchanges to raise funds, investment in the US market provides exposure to the best equity assets around the world,” Emkay Global Financial Services said recently while announcing its tie-up global investment platform Stockal to help its clients invest in US-listed stocks and securities.

Published on April 11, 2021

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