Outward remittances till Nov exceed FY08 level
Indians spend more for overseas education, travel & property.
The global downturn has not affected outward remittances by individuals.
According to the latest data released by the Reserve Bank of India, during the first eight months of the current financial year, the total outflows through the liberalised remittance scheme (LRS) for individuals was estimated at $531 million.
This was just $7 million short of the remittances made during the preceding three years, which added up to $538.3 million (see table).
While there is some impact on overseas deposits and investment in equity and debt instruments, Indians seem to be spending more on foreign education and travel, besides sending out cash gifts to friends and relatives abroad.
Under LRS, residents are permitted to remit up to an amount of $200,000 every financial year (April-March) for current and capital account transactions.
Over the years, the scheme, which was introduced in February 2004 with a ceiling of $25,000 a year, the limit has been increased periodically.
The increase in outward remittances is despite the depreciation of the rupee against the dollar, which has meant that Indians have to spend more of the local currency to spend the same amount of dollars.
In case of at least three of the six purposes for which outward remittances have taken place, the outgo during the eight months of the year have been more than what was remitted in the whole of 2007-08.
While outward remittances are nowhere near the levels seen in August ($159.7 million), there has been a pick-up of sorts in November when outflows under LRS were estimated at $58.8 million as against $51 million in September and $40.9 million in October.
The steep rise in August was mainly attributed to fee payments with the outgo for “other purposes”, comprising education, tours and travel, estimated at $123.6 million.
While monthly data for the last financial year was unavailable, outward remittances in 2007-08 for education and travel were estimated at $160.4 million.
Some individuals are probably using the subdued real estate market overseas to buy immovable property too though in the last three months, the outgo under this head has dropped.
| OUTBOUND | ||||
| Purpose | 2005-06 | 2006-07 | 2007-08 | 2008-09* |
| Deposits | 23.2 | 19.7 | 24.0 | 19.6 |
| Immovable property purchase | 1.9 | 8.5 | 39.5 | 42.9 |
| Equity/debt investment | 0 | 20.7 | 144.7 | 98.0 |
| Gift | 0 | 7.4 | 70.3 | 98.3 |
| Donations | 0 | 0.1 | 1.6 | 1.0 |
| Others# | 0 | 16.4 | 160.4 | 271.3 |
| Total | 25 | 72.8 | 440.5 | 531.1 |
| In $mn | ||||
| * Data for April-Nov, # Includes education, tours and travel Source: RBI | ||||
“The valuations in some of the Gulf countries are very attractive and I am looking for an apartment in Dubai since I can afford it now,” said the chairman of a small private bank.
From $6-7 million a month in the first quarter of the current financial year, remittances for property purchase abroad dropped to $2.6 million in November.
For equity and debt investments, the RBI data shows that remittances rose to $12.4 million in November, the level seen in June and July but much higher than those in September and October when the impact of the credit crisis was seen across the globe and investors became risk averse.
Indians would need to remit around $45 million between December 2008 and March 2009 – or around $11.25 million a month — for investment in equity and debt overseas to match last year’s level of $144.7 million.
In case of deposits overseas, however, there has been little pick up with the outgo in November estimated at $1.4 million, as against $3-4 million a month between April and June 2008.