Equity, debt markets helped outward remittance rebound in August

Outward remittances under the Reserve Bank of India’s (RBI’s) liberalised remittance scheme (LRS) rebounded in August, aided by investment in equity and debt markets as well as travel. This comes after a decline in overall remittances in July.

According to data released by the RBI in its monthly bulletin for August, outward remittances under the scheme were worth $3.34 billion in August, up 26.68 per cent from $2.68 billion in the year-ago period. The overall remittances increased by 43 per cent from July.

In July, the remittances had declined by 39.36 per cent month-on-month (M-o-M) to $2.36 billion from $3.89 billion in June.

It was due to a steep decline in funds sent for maintenance of close relatives and investments due to preponement of remittances to June owing to change in the LRS tax scheme.

According to August data, international travel constituted nearly 60 per cent of the entire outward remittance by Indians under the scheme. Outward remittances for international travel rose to $2.03 billion, 38.78 per cent higher than $1.47 billion from the same period in 2022.

Investments in the equity and debt markets rose by 75.75 per cent to $94.08 million from $53.53 million in the year-ago period.

After international travel, Indians spent most on overseas education, followed by maintenance of close relatives, and gifts.

According to the RBI data, in August, outward remittances under the scheme for overseas education were $483.29 million, followed by $378.41 million for maintenance of close relatives, and $268.89 million as gifts.

Remittances for deposits dropped by 15.66 per cent year-on-year (Y-o-Y) to $60.74 million from $72.02 million in August 2022. Similarly, medical treatment also saw a minor slippage across the time period.

The LRS scheme, introduced in 2004, allows all resident individuals, including minors, to remit up to $250,000 per financial year for any current or capital account transaction or a combination of both.

Initially, the scheme was introduced with a limit of $25,000. The LRS limit has been revised in stages consistent with the prevailing macro and micro economic conditions.