personal finance

Indians’ spend on foreign trips up 253 times in 5 years

Mumbai: The biggest increase in Indians spending overseas has been on account of travel, where the monthly spend has increased nearly 457 times from less than a million dollars in July 2013 to $450 million two months ago. The other large hike in expenditure has been on studies abroad, which has grown 22 times to $343 million over the same period.

While there might have been exceptional reasons for the month-on-month increase, the full-year numbers show that this is a consistent trend. For instance, the annual spend on foreign travel has gone up 253 times from $16 million in FY14 to $4 billion in FY18. Similarly, Indians spent $2 billion on studies abroad in FY18 — 17 times more than the $2.9 billion spent in FY14.

While a part of the spike in spending is due to better reporting as payments shift to credit cards, there has also been a sharp increase in the number of Indians travelling abroad, which went up to 23 million in 2017. Besides the country’s dependence on imports for oil and electronics, these direct spends by individuals are also having an impact on the country’s balance of payments.

To put things in perspective, the annual spending by Indians under the Liberalised Remittance Scheme (LRS) — which allows each citizen to spend up to $2,50,000 annually — was only $1 billion in 2013-14. This went up to a record $11.3 billion in 2017-18 and, in the first four months of current fiscal 2018-19, the number is already at $4.2 billion.

The total expenditure abroad by individuals last year was over 23% of the $48-billion current account deficit in FY18. The biggest component of this is the spending by Indians who travel overseas, having paid $4 billion in FY18 compared to $92 million in FY14. Remittance towards studies has gone up from $461 million to $2 billion in four years. Interestingly, Indians have reduced their investment in overseas properties and financial instruments.


According to bankers, one reason for the increase in international travel could be that the rupee has been very steady until 2018. Also, financing has become much easier. “Although there is no separate category for travel loans, there is anecdotal evidence that a large share of personal loans are now being taken for overseas travel,” said an official with a large private bank, which is the market leader in personal loans.

Bankers said that the demonetisation exercise had also resulted in an increase in remittances. In January this year, the RBI revised the reporting norms for banks to ensure that data is captured in such a manner that no one breaches the limits. From April 2018, the RBI made it mandatory for banks to report on a daily basis individual transactions under the LRS. The new system enabled banks to see the remittance that each individual had already made during the year.

Bankers say that the reason why overseas investment in property and markets by Indians is going down is because these are typically done by high net worth individuals. “Promoters of companies need not take the LRS route to invest abroad. Since rupee is fully convertible on the current account, they can use the corporate route to buy assets abroad without any restrictions on the value,” said a foreign exchange dealer.

The other reason for the decline in investment in property is that the RBI has started cracking down on Indians using this route to invest money overseas.

In 2013, the RBI reduced the remittance limit to $75,000 a year from $2,00,000 and disallowed use of the LRS for purchase of property. In February 2015, the limit was hiked to $2,50,000 and property purchase was allowed. But the RBI disallowed consolidating a family’s remittance unless each of the member had a share in the property.


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