Non-resident Indians (NRIs) are remitting more money back home. Individual remittances from Indians working abroad have surged 50 per cent at $8.6 billion in the first quarter of 2007-08, against $5.9 billion in the year-ago period. Healthy NRI remittances have partially helped offset the rising current account deficit of $4.7 billion during the first quarter ended June this year. Although the US has seen a slowdown, remittances may not have been hit. West Asia and Europe, which are the other sources for remittances into India, have shown strong growth.
NRI remittances show no signs of flagging. Individual remittances from Indians working abroad have jumped 50 per cent at $8.6 billion in the first quarter of 2007-08, against $5.9 billion in the year-ago period.
The inflows are surging by the day. During January-June 2007, remittances by the Indian diaspora almost touched $17 billion.
While the US, the major source for remittances, is witnessing a slowdown, other economies, including those in West Asia and Europe, have seen robust growth. West Asia is riding on peak oil prices, also fuelling a construction boom. OPEC exports touched $649 billion last year and the oil boil shows no sign of cooling. Of the $23 billion in foreign remittances last fiscal, nearly half came from five million NRIs in the Gulf.
There are other reasons for the spurt. Discouraged by the cap on interest rates on non-resident deposits, overseas Indians are remitting more money to relatives to invest in schemes here. According to RBI, during April-June 2007, NRI deposits saw a net withdrawal of $447 million, one of the highest outflows in 12 quarters. Last year had seen net inflows of $1.2 billion. Bankers say a lot of this money is used by the relatives to invest in various assets in the local markets as the NRI ends up earning a higher return. Besides, Indians can also gift substantial amounts to their relatives abroad as the central bank has liberalised overseas remittances.
The central bank had capped the interest rate payable to NRIs by commercial banks twice this year to curb surging forex inflows and close the liquidity tap.
NRIs are also keen to jump onto the India growth story. Real estate has, in particular, excited them. It seems that many are buying land both as an investment and also to secure a pad for possible return home. According to a study by the central bank, about 13 per cent of the funds remitted by NRIs in 2006 were invested in equity and real estate. While 20 per cent of the funds are parked in bank deposits, 54 per cent of remittances are used to meet family expenses.
Healthy NRI remittances have helped offset the rising trade deficit during the first quarter. The deficit widened to $4.7 billion during April-June this year, compared to $4.57 billion during the same period in 2006.
Last year, India received the highest remittances globally of $23 billion, followed by China ($21 billion). The US and Saudi Arabia were the largest sources of remittances to developing countries. Out of the total amount, $8-9 billion was estimated to have come from the US. Around 44 per cent of the inflows came from North America, followed by the Asian region comprising the Gulf and East Asia, which contributed about 32 per cent of the funds received.
Among the states, Andhra Pradesh received the highest amount of NRI remittances. It is followed by Maharashtra. The southern state, known for its burgeoning IT sector, received 22 per cent while the financial hub Maharashtra got 15 per cent of the total remittances to India. RBI put the higher share of North America on the growing strength of professionals in software and other technology related areas. Ahmedabad, Bangalore, Chandigarh, Chennai, Puducherry, Delhi, Hyderabad, Jaipur, Kolkata, Mumbai and Kochi were the major remittance receiving centres, which also acted as percolators of money into the hinterland.
However, cumulative foreign direct investment (FDI) into India by NRIs was $8 billion and constituted less than 5 per cent of the total FDI in the country. Considering that Indians worldwide produced an economic output of about $400 billion (equal to about 30 per cent of India’s GDP), the number was paltry. If at all a pitch can be made for more from the diaspora, it is here in the sphere of direct investment.
NRI remittances show no signs of flagging. Individual remittances from Indians working abroad have jumped 50 per cent at $8.6 billion in the first quarter of 2007-08, against $5.9 billion in the year-ago period.
The inflows are surging by the day. During January-June 2007, remittances by the Indian diaspora almost touched $17 billion.
While the US, the major source for remittances, is witnessing a slowdown, other economies, including those in West Asia and Europe, have seen robust growth. West Asia is riding on peak oil prices, also fuelling a construction boom. OPEC exports touched $649 billion last year and the oil boil shows no sign of cooling. Of the $23 billion in foreign remittances last fiscal, nearly half came from five million NRIs in the Gulf.
There are other reasons for the spurt. Discouraged by the cap on interest rates on non-resident deposits, overseas Indians are remitting more money to relatives to invest in schemes here. According to RBI, during April-June 2007, NRI deposits saw a net withdrawal of $447 million, one of the highest outflows in 12 quarters. Last year had seen net inflows of $1.2 billion. Bankers say a lot of this money is used by the relatives to invest in various assets in the local markets as the NRI ends up earning a higher return. Besides, Indians can also gift substantial amounts to their relatives abroad as the central bank has liberalised overseas remittances.
The central bank had capped the interest rate payable to NRIs by commercial banks twice this year to curb surging forex inflows and close the liquidity tap.
NRIs are also keen to jump onto the India growth story. Real estate has, in particular, excited them. It seems that many are buying land both as an investment and also to secure a pad for possible return home. According to a study by the central bank, about 13 per cent of the funds remitted by NRIs in 2006 were invested in equity and real estate. While 20 per cent of the funds are parked in bank deposits, 54 per cent of remittances are used to meet family expenses.
Healthy NRI remittances have helped offset the rising trade deficit during the first quarter. The deficit widened to $4.7 billion during April-June this year, compared to $4.57 billion during the same period in 2006.
Last year, India received the highest remittances globally of $23 billion, followed by China ($21 billion). The US and Saudi Arabia were the largest sources of remittances to developing countries. Out of the total amount, $8-9 billion was estimated to have come from the US. Around 44 per cent of the inflows came from North America, followed by the Asian region comprising the Gulf and East Asia, which contributed about 32 per cent of the funds received.
Among the states, Andhra Pradesh received the highest amount of NRI remittances. It is followed by Maharashtra. The southern state, known for its burgeoning IT sector, received 22 per cent while the financial hub Maharashtra got 15 per cent of the total remittances to India. RBI put the higher share of North America on the growing strength of professionals in software and other technology related areas. Ahmedabad, Bangalore, Chandigarh, Chennai, Puducherry, Delhi, Hyderabad, Jaipur, Kolkata, Mumbai and Kochi were the major remittance receiving centres, which also acted as percolators of money into the hinterland.
However, cumulative foreign direct investment (FDI) into India by NRIs was $8 billion and constituted less than 5 per cent of the total FDI in the country. Considering that Indians worldwide produced an economic output of about $400 billion (equal to about 30 per cent of India’s GDP), the number was paltry. If at all a pitch can be made for more from the diaspora, it is here in the sphere of direct investment.