Foreign spends dip $5.7 billion in 10 months

MUMBAI: The average monthly dollar spends by Indians has fallen 33% to less than $1 billion in the first 10 months of FY21, down from $1.5 billion in the same period of the previous fiscal. The drop came as citizens cut spending on foreign education, international travel, and remittance to relatives. In absolute terms, total remittances for the first 10 months of FY21 at nearly $10 billion was $5.7 billion lower than $15.7 billion in the same period of the previous year due to the pandemic.
According to Reserve Bank of India data, Indians spent $2.6 billion in overseas travel in the first 10 months of FY21, which is less than half of the $6.1 billion they spent in FY20. On overseas education, Indians spent $3 billion in the same period of FY21, which is over a billion dollars less than the $4.2 billion they sent abroad in the previous year.
While overseas travel did pick up marginally around the third quarter as the first wave of the pandemic ebbed, the slump in the sector has returned with the second wave. “The only signal of a pick-up that we are getting is in remittances for overseas education. While many are going ahead with their plans to study abroad, they are postponing admissions to September as the expectation is that the pandemic situation will ease and there will be offline classes,” said Ebix Cash World Money business head M Hariprasad.
He added that while overseas travel had picked up for closer destinations like Dubai and Maldives in December, things look bleak right now. Although some travel agents are optimistic of a pick-up in December 2021.
The decline in remittances on account of education and travel alone adds up to $4.6 billion. This is significant, considering that India’s current account deficit for the third quarter was $1.7 billion. The current account position returned to a deficit after turning surplus in the first half due to a decline in economic activity and lower oil prices.
Besides travel and education, the third biggest item of expenditure is the maintenance of non-resident relatives, which amounted to $2.1 billion during the first 10 months of FY21. This is only $616 million lower than what was sent during the same period of the previous year.
Under the Liberalised Remittance Scheme, all resident individuals, including minors, can freely send up to $2.5 lakh per financial year (April-March) abroad for any reason excluding some prohibited transactions like gambling.
The other reasons for buying dollars are foreign currency deposits, purchase of property, investment in securities, donations, maintenance of relatives, and gifts. Sending money abroad as a gift continued to be high at $1.2 billion when compared to $1.5 billion earlier. Spends on foreign travel and education saw a big jump from FY18 when average monthly remittances shot up to almost $1 billion from $630 million in the previous year. In FY19, the average was $1,148 million.