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There are 272 Million International migrants in the world and Indians make up 6.4% of the world's total immigrant/expat population, per the United Nations Data. Indian expats are in a broad sense what we refer to as the Non-Resident Indian (NRI). Before we move on the NRI's contribution to the Indian economy, we define an NRI and an Overseas Citizen of India (OCI)?
Related Article: Here's How Budgets Impact NRIs
According to the Income Tax Act of 1961, an Indian citizen settled in a foreign country for employment who is not physically present in the country for more than 240 days in a financial year is regarded as an Non-Resident Indian (NRI). This definition mirrors the one announced in the new Union Budget announcement of 2020. The proposal changed the original 182 days clause to 240 days.
Overseas Citizenship of India (OCI) is given to Persons of Indian Origin (PIO) who immigrated from India and subsequently acquired citizenship of a foreign country. This applies to everyone besides citizens of Bangladesh and Pakistan. This is applicable only to people whose home country allows dual citizenship in some form or the other under local laws.
Did you know that it is illegal for an NRI to hold domestic accounts in India? Know the laws of NRE/NRO account holding.
According to the United Nations (UN) Department of Economic and Social Affairs, Indian origin migrants were the leading among the international migrants with 17.5 million population out of the total migrant population of 272 million. The Middle Eastern countries account for the majority of Indian expats, followed by the USA, the UK, and Canada.
NRIs (Non-Resident Indians) contribute to the Indian economy significantly. It aids the Indian economy at a large-scale specifically generating employment internally by strengthening national savings, capital accumulation, investment, and so on. On the small-scale, the remittance received by the family members is used to meet their basic needs, and open up opportunities for investing in education, health care, and so forth.
NRI contribution to India's GDP is significant especially in these times of economic slowdown. The RBI has directed the Indian banks to attract NRI deposits by giving them the options of numerous short and long term investment plans.
Remittance plays an important part in developing countries in terms of their economic systems, individual households, and businesses. As per the World Bank, remittance inflows are a measure of the creditworthiness of a nation which implies it can borrow more money.
Since 1991, India has been steadily experiencing great remittance growth and continues to be on that track. There has been a significant surge of remittances from 2016 ($62.75 billion) to 2017 ($68.97). In 2018, the World Bank estimated remittance of India to be the highest in the world with $79 billion, followed by China and Mexico at $67 billion and $36 billion respectively. These remittances constituted 2.9 % of India's GDP and remittances formed the country's foreign exchange money of roughly around 22% to 23%.
According to a survey by Reserve Bank of India, 59.2% of the remittance amount received in India was used for family maintenance. And Bank deposits amounted to about 20% while 8% were invested in equity shares, property, real estate.
It is clear how NRIs' money transfers are helping the Indian economy. NRI contribution to the Indian economy is significant because each transfer increases the country's foreign exchange pool and is the major source of foreign currency inflow. Remittances increase the purchasing power of people which drives the consumption market and move the demand and supply forward.
Further, helping the financial constraints in the family that now they can invest in a business or save for emergencies or social security for the elderly and relatives. Besides, it can increase the local economy. To simply put, remittances are personal flows from NRIs to their families, friends, or relatives and a contribution to the stability of the various economies.
NRI can play a significant role in shaping the country's financial, social and economic conditions. In the last few years, NRIs have started merging into varied activities in India including market development such as outsourcing, technology transfer, tourism, and other contributions namely in political and substantial flows of knowledge.
With India's current economic slowdown, the NRI contribution can have a positive impact on reviving the economy. Many NRI businesses like UAE based companies-Lulu International, NMC Healthcare, etc. have announced major multi-million investment projects in India. However, newer initiatives by the government are needed to attract more NRIs to invest in the country. The investment of NRI in India's market and other government developmental activities will help in building better healthcare, education, social protection, and other sustainable growth in the country. This will also help to cut down government spending in the long run.
Prime Minister Narendra Modi aims to make the Indian economy a $5 trillion economy by 2024 and subsequently a $10 trillion economy by 2030. He also mentioned that the target is to make $1.7 trillion worth of investments in the next five years. The central government has initiated various steps to ensure that its target is achieved. Besides, NRIs are encouraged to invest in several sectors like real estate, education, businesses, infrastructure development, etc. Indian banks are also directed to attract NRI deposits and to open bank accounts in order to help build their financial assets and for investment purposes. We will have to wait and watch. Follow us on Twitter @CompareRemit for regular updates on all things remittances and NRI.
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