$14 bn remitted by Indians in Apr-Dec as Covid-19 restrictions ease

Travel, studies abroad lead the surge as Covid-19 restrictions ease

Outward remittances under the Reserve Bank of India’s Liberalised Remittance Scheme (LRS) have made a strong comeback in the current financial year after a tepid 2020-21 as Covid-led disruptions impacted the flows.

According to the latest data released by the RBI, outflows under the scheme were $13.8 billion in the first nine months of the current financial year as compared to 12.7 billion for the entire FY21.

Remittances in the last three months of 2021 were $4.9 billion, mainly due to a surge in travel and studies abroad-related remittances. Capital India, which provides foreign exchange-related solutions via its arm Remitx, said opening up of visas by several countries for leisure travel was one of the factors for the sharp increase in travel-related remittances.

“There are multiple factors that have led to a jump in travel-related remittances. The embassies and consulates of many countries have opened to issue visas for leisure travel. Countries like Dubai have been promoting their Expo 20-20, which has also seen a sharp rise in travel to the UAE. Universities overseas have been asking their students to fly to their respective colle­ges/universities and attend lectures. All these reasons have led to an increase in travel-related remittances,” a senior official at Capital India said.

Travel-related remittances jumped to $884 million in December 2021 as compared to $456 million in November. Remittances related to studies abroad dipped to $254 million in December after touching $580 million in October and $482 million in November.

Total outward remittance in December was $1.78 billion as compared to 1.5 billion each in November and October.

Under the LRS, all resident individuals, including minors, are allowed to freely remit up to $250,000 in every financial year for any permissible current or capital account transactions, or a combination of both.

The LRS for individuals, while it is open for both current and capital account transactions, is largely in current account transactions like travel, studies, etc.

The RBI had recently said the LRS is largely in current account transactions and that there is a need to review the scheme due to changing requirements.

In the financial year 2019-20, outward remittances hit a record $18 billion, a year before the Covid-19 pandemic broke out. Capital India said the actual spike in remittances is expected in 2023-24.

“Number of events that have been postponed since FY20 will have to be completed. MICE (meetings, incentives, conferences, and events), which were postponed due to travel restrictions, will open. Corporate travel, though restricted, will also see a small spike which will add to the outflows. Finally, leisure travel will see a considerable spike as many people have been waiting to travel on vacation overseas,” the Capital India official said.

“We feel that the outflows (FY22) could either be at the same levels seen in FY20 or a shade lower. We at Capital India (RemitX) feel the actual spike can be seen in FY23-24 when all the countries will have opened up and travel/trade growing substantially,” the official added.