Indians Investing Overseas and Renouncing Citizenship Up Sharply Since 2016

Total remittances from India under the Liberalized Remittance Scheme (LRS) surged from $1.1 billion in the fiscal year 2014 to $31.7 billion in 2024, marking an astonishing 2,808% increase over the decade.

This rapid growth also reflects changes in investment behaviors among high-net-worth individuals (HNWIs), who channel more funds into overseas deposits, equity and debt investments, and real estate.

The Reserve Bank of India (RBI) introduced the Liberalized Remittance Scheme (LRS) in 2004. This scheme allows Indian residents, including individuals, to freely remit up to a specified amount of foreign exchange per financial year for various permitted current and capital account transactions.

These transactions can include overseas education, medical treatment, employment, emigration, maintenance of close relatives, travel, and investments in real estate, stocks, debt instruments, and bank deposits abroad.

Key points about the LRS:

1. Scope: The scheme applies to all resident individuals, including minors.
2. Limit: The RBI sets the current limit at $250,000 per person per financial year (as of 2024). The RBI has revised this limit several times since the scheme's inception.
3. Flexibility: Residents can use this limit for one or more permissible activities within a financial year.

Deposit Remittances

Deposits grew from $31.4 million in FY2014 to $916 million in FY2024, an impressive increase of 2,818%. The compound annual growth rate (CAGR) for deposit remittances stood at approximately 40%, indicating consistent year-on-year growth.

Despite this substantial rise, deposit remittances remained relatively stable at about 3% of total remittances in FY2024.

Property Purchase Remittances

Remittances for the purchase of immovable property abroad rose from $59 million in FY2014 to $243 million in FY2024, reflecting a 312% increase. The CAGR for property remittances reached around 15%.

Equity and Debt Investment Remittances

Investments in equity and debt instruments abroad increased from $166 million in FY2014 to $1.5 billion in FY2024, marking an 812% rise. The CAGR for investment remittances reached approximately 25%.

Travel Remittances

Travel remittances have seen an extraordinary surge over the past decade, growing from $16 million in FY 2014 to $17 billion in FY 2024, a staggering 106,000% increase.

The most dramatic growth coincided with India's 2016 demonetization, as remittances grew from $595 million in FY 2016 to $2.5 billion in FY 2017, a 331% increase in a single year.

This trend continued upward, only briefly interrupted by the COVID-19 pandemic in FY 2021, before quickly rebounding and reaching new heights.

Peak in FY2024 and Shifts in Investment Preferences

Investment remittances reached a decade-high of $1.5 billion in FY2024. Property remittances also peaked at $242 million in the same year, demonstrating continuous growth in overseas real estate investments.

Deposits hit their highest level in FY2023 at around $1 billion before slightly decreasing to $916 million in FY2024.

The combined remittances for deposits, property, and investments in FY2024 amounted to around $2.7 billion, accounting for 8% of the total remittances.

In contrast, these categories made up 23% of total remittances in FY2014, indicating that while they have grown in absolute terms, their share has diminished as other remittance categories expanded more rapidly.

Post-Demonetization Surge

The demonetization initiative in 2016 served as a pivotal moment in influencing these trends. In an effort to combat corruption and counterfeit currency, the Indian government declared all ₹500 and ₹1,000 banknotes would cease to be legal tender, removing 86% of the country's currency in circulation overnight.

For HNWIs, demonetization prompted a reassessment of asset allocations and a search for avenues to protect wealth from domestic economic uncertainties.

Meanwhile, Indians are increasingly giving up their citizenships (India doesn't technically permit dual nationality): More than 216,000 Indians relinquished their citizenships in 2023, up nearly 65% from a decade ago.

Following demonetization, funds moving abroad saw a notable uptick. Between FY2016 and FY2024:

• Deposits increased from $103 million to $916 million, a 790% growth.
• Property remittances rose from approximately $89 million to $243 million, a 174% increase.
• Investment remittances grew from about $315 million to $1.5 billion, marking a 380% rise.
• Total remittances CAGR since demonetization to FY2024 is 28%.

Impact of the COVID-19 Pandemic and Strong Recovery

During the COVID-19 pandemic in FY2021, total remittances decreased to $12.68 billion from $18.76 billion the previous year, a drop of 32.4%.

Despite this decline, deposit remittances increased by 9% from $623 million to $680 million, and investment remittances grew by 9% from $431 million to $472 million. Property remittances, however, decreased by 27%, from $86 million to $63 million.

Post-pandemic, remittances rebounded strongly. From FY2021 to FY2022:

• Deposit remittances increased by 22% to $830 million.
• Property remittances rose by 80% to $1.1 billion.
• Investment remittances grew by 58% to $747 million.

From FY2022 to FY2023, the upward trajectory continued:

• Deposit remittances grew by 22% to around $1 billion.
• Property remittances increased by 67% to $189 million.
• Investment remittances surged by 68% to $1.25 billion.

Continued Growth into FY2025

In the first four months of FY2025, total remittances reached approximately $9.6 billion. The investment remittance breakdown so far:

• Deposits: $206 million
• Property: $88 million
• Investment (equity/debt): $439 million

If this trend continues at the same pace, we can project the total remittances for the full fiscal year 2025 will be around $29 billion, potentially approaching the record high of $31.74 billion seen in FY2024.