Over $300 million was sent as outward remittance in just five months (April-August 2015)
India, the world’s largest remittance recipient, is also witnessing a sharp rise in outward flows linked to ‘studies abroad’ at a time the foreign education fad has picked up pace.
This is evident from that fact that over $300 million was sent as outward remittance in just five months (April-August 2015) for this purpose compared to $277 million that was sent in the full financial year (12 months) ended March 2015.
A slightly longer-term analysis of data provided by RBI shows that outward remittances for ‘studies abroad’ have actually gone up sharply. For a 12-month period starting September 2014 and ending August 2015, such outward remittances amounted to $492.5 million.
In the same period a year before, outward remittances stood at a paltry $180.7 million. This represents a 172 per cent massive jump in such outflows.
Beside other factors, the penchant for American education is also boosting outward remittances for studies abroad. “Indian student enrollment in US institutes spiked by a massive 30 per cent over previous year leading to sudden increase in outward remittances for studies abroad. Despite this increase, outward remittance under studies abroad will not have any measurable impact on the rupee as it accounts for a small fraction of our balance of payments,” said Abhishek Goenka, MD & CEO of forex advisor IFA GLOBAL.
With a large number of students opting for non-American education as well as rising living expenses, remittance firms are also handling large outflows.
For instance, in the first half of the financial year 2015, UAE Exchange handled outward remittances from India to the tune of Rs 544.53 crore for FCDD (foreign currency demand drafts) and Rs 563.91 crore for maintenance expenses of close relatives. This was 62 per cent more than what the organisation had handled as transfers during the same period in 2014.
Said Promoth Manghat, CEO, UAE Exchange “This hints at the renewed vigour of Indians to send money beyond the borders, which is triggered primarily by foreign education in UK, Australia, USA, New Zealand, Russia and the Philippines. Along with the growing tuition fees, the living expenses of these countries are also spiraling, impacting remittances.”
A senior official at one of the top private sector banks said: “We have been seeing normal growth in outward remittance business. About 20-25 per cent growth is what we have witnessed. We haven’t seen any sharp jump although there is a spike just ahead of the academic calendar year abroad. Rupee depreciation can also be one of the factors for the jump. From 62 levels against dollar in April, the local currency had moved to about 66 at August end. This means you had to pay 6-7 per cent more in rupees for every dollar sent abroad at the end of August.”
The World Bank in a recent report has mentioned that the Indian government raised the permissible limit on outward remittances from $125,000 to $250,000 (with further allowances for education and medical expenses).
The limit under liberalised remittance scheme (LRS) for resident individuals was reduced to $75,000 from $200,000 in 2013 as a measure to curtail foreign exchange outflow and support the rupee. This limit was later hiked to $125,000.
Source: My Digital FC
By: Kumar Shankar Roy