As Covid and the lockdown cripple the global economy and ground international travel, the amount of money Indians send abroad has plunged to a 50-month low.
In April 2020, Indians remitted just $499.14 million under the Liberalised Remittance Scheme (LRS) — a 61% decline from $1,287.91 million in the same month last year, according to latest data of the Reserve Bank of India.
The monthly outward flow in April 2020 is lowest since February 2016 when it was $449.28 million.
Under LRS, resident individuals, including minors, may remit up to $250,000 per financial year for permissible current or capital account transactions or a combination of both.
A dip in outward remittances was seen in March 2020, too, but it plummeted the following month.
The sharpest decline — 71.81% — has been recorded in money sent for travel purposes which came down to $121.13 million in April this year from $429.75 million a year ago.
This is significant as an estimated 2 million Indian nationals travel overseas every month.
The money sent for studies abroad has also seen a sharp decline of 68.85% — $78.76 million in April this year from $252.84 million in the corresponding month last year.
A triple whammy effect
This dip reflects economic distress, lockdown at home and curbs on overseas travel. Significantly, the cut in expenses on education, medical treatment and maintenance of relatives may endure beyond the travel ban.
Over 7 lakh Indian students pursued studies in foreign institutions in 2018.
“Maintenance of close relatives” category, which contributes the highest amount to total outward remittances under LRS has recorded a decline of 50%— $148.25 million in April this year from $296.14 million last year.
Substantial decline has been recorded in money sent for purchase of immovable property abroad; investment in equity/debt; deposit; gift; medical treatment; and other categories during April 2020. The only exception is “donations” which contribute a negligible amount to the total outflows.
While the category “Gift” has recorded a 66% decline in outward remittances, “medical treatment” has seen a decline of 45.85% in April 2020. But the amount remitted for medical treatment purposes is negligible.
Two categories, which recorded lesser decline are — ‘deposit’ and ‘investment in equity/debt’. The amount of money sent out of the country for the purpose of deposit just declined by 7.69% in April 2020 compared to the same month last year. Similarly, ‘deposit’ and ‘investment in equity/debt’ has recorded a decline of 29.91%.
Resident Indians have remitted a record $18.75 billion under LRS in the financial year ended March 31, 2020.
Despite the outflows reaching a record level during last financial year, March, 2020 saw a dip — $1,358.82 million — against $1,476.82 million in the corresponding month of 2019.
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