Wealthy Indians spend more abroad
According to data recently released by the Reserve Bank of India, high net worth individualshave been doubling, tripling — and in some cases, up to 30 times increase — in spending on purchase of overseas property, stocks and gifts in the past five years.
Since 2004, a resident Indian can remit up to a total of US$ 200.000, including gifts to relatives abroad, purchase of property, investment in fixed deposits, equities and bonds and donations as well for family maintenance, studies abroad and medical treatment, a year. Since this scheme was introduced in 2004, about US$ 4 billion have been spent abroad, resident Indians investing money in real estate, art, currency and interest rate options and also in hedge funds.
According to Asia Standard Chartered Bank. "Affluent individuals are remitting money to geographies like US, UK, Europe and South East Asia. As Indians increasingly get integrated with the global world these remittances will continue to rise.”
A big chunk of the gift component of the money remitted overseas is believed to be the returns on investments made from the money relatives had earlier sent. Corroborating this view is the data on inward remittances by the Indian diaspora.
These have been growing sharply since the nineties, which witnessed a boom in the IT industry and a large-scale migration of Indian software professionals to North America and Europe. Inward remittances have crossed US$ 50 billion. According to an RBI study, only 61% of the money sent by relatives overseas is used for family maintenance. The balance is used for investments in bank FDs, stocks and real estate, among others.
adapted from The Economic Times