Indians' foreign investments increase 28% in 12 months, shows data

Lower remittance share, higher growth amid diversification play

Indians looking for investment opportunities abroad have remitted over half-a-billion dollars in the last 12 months, which is an increase of around 28 per cent over the previous year. Though still a small fraction of overall remittances, the growth rate indicates strong appetite for foreign investments.

Indians invested $593.5 million in the 12 months ended September 30, shows the Reserve Bank of India’s data. The rolling 12-month figure for August was similar at $593.6 million. Both these numbers represent the highest value of remittances for equity and debt investments made over a 12-month period since at least March 2012.

The analysis considered 12-month periods to smoothen out any seasonal variations in investment patterns. Indians are allowed to send abroad $250,000 each under the Liberalised Remittance Scheme (LRS). The data is released with a lag, and the latest data is for September.

Most of the money is utilised for studies abroad or travel, with the categories accounting for 65.9 per cent of overall remittances.

However, considering the increase in retail investors and the rising appetite for diversification, a number of brokerages in India have initiated tie-ups that would allow local investors to buy shares abroad.

Many have pitched this as a means of diversification which targets the fact that only a single-digit proportion of remittances have historically been used to fund investments abroad. An average of only 3.7 per cent of overall remittances have gone towards such investments in the last 12 months.

The investment growth rate has been steadier than overall remittances, which jumped to a multi-year high of $1.97 billion in September. This came after a drop in remittances after the pandemic’s outbreak as people shelved travel plans. Investments have grown at a steadier double-digit growth rate, coming in at 27.7 per cent for September compared to 5.2 per cent for remittances overall (see chart 1).

And the pace seems to be increasing, lumpy though the remittance flow might be as pent-up demand asserts itself. The total remittances at the half-yearly mark in September are already more than 70.3 per cent of what was seen in the whole of the previous financial year. The corresponding figure for equity and debt investments is 72.3 per cent. An analysis of corresponding data for previous years shows that this is the first time in five years that September numbers have run up so far ahead of the previous financial year (see chart 2).

This last happened in September 2016, when half-yearly remittances were 89.2 per cent of the previous financial year’s total investments.

Global financial majors including Morgan Stanley, Nomura, UBS, and Goldman Sachs have suggested that Indian equities may already have run up past their peak, with some suggesting that other markets like China and Indonesia are likely to perform better.