Mumbai, April 26, 2017: For the first time, foreign travel has grabbed the spot of the number one reason why Indian individuals spend money overseas.
The top reason for remittances was Indians sending money abroad for study purposes or maintenance of close relatives even until last year.
These remittances are made under the Reserve Bank of India's Liberalised Remittance Scheme which allows individuals to send up to $250,000 annually.
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Spending money on travel has ranked number three in the list of reasons for remittances for several years. But the current fiscal has witnessed a change in that.
According to TOI reports, in FY17 (up to February 2017), remittances towards travel increased 3.6 times to $2.3 billion, accounting for a third of total international spending by Indians. In FY16, the total amount spent on travel at $651 million, amounted to only 15% of the total remittances.
According to M. Hariprasad, senior VP and head of treasury at Centrum Direct, A good growth has been noticed in travel to destinations like Thailand, Dubai and other places in the Gulf. "A combination of affordable airfares and offers by intermediaries has brought international travel within the reach of a lot many people," he added.
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In 2013 when the rupee went into a free fall, the forex remittance limit was brought down from $200,000 to $70,000. However, in May 2015 this limit was restored and then increased to $250,000.
The spending on travel has nothing to do with the relaxation of ceiling on forex remittances as average spending is only in thousands of dollars; Hariprasad mentioned.
More than the relaxation of forex limits, overseas travel appears to have been boosted by the firming up of the rupee. However, travel companies insist that the growth is only normal because there is a shift to direct spending through credit cards and online bookings.
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Total remittances by Indians have gone up from $4.3 billion in FY16 to $7 billion in FY17 (up to February), an surprising increase of 63%. On the other hand, Indians sending money abroad for purchase of immovable property has shrunk from $90 million in FY16 to $82 million. A marginal decline on spending for medical treatment purposes overseas from $17 million to $15 million has been spotted as well.
However, as data for March 2017 is not available yet, the numbers could still rise.
– prepared by Durba Mandal of NewsGram. Twitter: @dubumerang