For years, Indian investors have been obsessed with the number of money foreigners bring into Indian markets. Today, Indians are also investing more and more abroad.
According to data from the Reserve Bank of India (RBI), Indians invested US$19.611 million in 2021-22, up from US$12.684 million the previous year. Savvy investors have been investing some of their money abroad for some time for better diversification, taking advantage of the Indian government’s Liberalized Remittance Scheme (LRS), which allows each Indian resident to send US$2.50,000 per fiscal year to foreigners to send them. Over time, the RBI has increased this limit. When the program started in 2004, it cost just $25,000.
Mutual funds have traditionally offered international stocks, particularly US stocks, to Indian investors. But Covid-19 has accelerated this pace. The strong rally in global stock markets following the onset of the global Covid-19 pandemic, fueled largely by cash injections by governments to support economies, has trickled down to equity markets. Stock indices and various sectors, particularly information technology stocks, have risen thanks to companies investing in technology to support working from home. In 2021-22 alone, Indians invested US$747 million in international equity and debt investments, up from US$472 million in the previous year.
But there are many other reasons why Indians send money abroad. In addition to investments, you can use the LRS to send money for travel, vacations, health care, gifts, donations, study abroad funding, and even real estate purchases. . In 2021-2022, Indians purchased $113 million worth of the real estate. From London to Dubai to New York to the Caribbean, Indians are buying apartments abroad. Attractive yields and the potential for capital appreciation are just one reason, according to experts. But even simply gaining permanent residency on the condition of investing a sum of money abroad to buy real estate is an offer many wealthy Indians can’t resist.
For those who don’t want to bother investing in physical property, real estate investment trusts (REITs) offer a foreign-owned portion.
Then, of course, there are art and alternative investments. Rare art, artifacts, and collectibles help investors diversify their portfolios across assets regardless of stock markets and interest rate cycles. Although the risk is high, there is also the potential for high returns if you choose the right currency. Read this article to learn more about collecting art and why it’s important to take care of it after you buy it.
The Indians love gold. But some of us are intrigued by buying gold in Dubai and the rest of the Middle East, as many believe it saves on import duties. It’s a mistake. Importing gold to India is not only restricted and subject to conditions, but gold in Dubai is also subject to high marking fees.
As money flows in and out of the country, global Indians and non-residents also need to know how to manage their bank accounts.
Last but not least, there are various fees, costs, and taxes associated with sending and investing money abroad.