Saturday June 9, 09:48 AM
NRI remittances to rival MNCs as investors in India |
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Long the single-largest source of foreign capital into India, non-resident Indians may one day become the prime source of investment in the domestic economy. A new report on remittances to India says "NRIs now see India as an 'investment destination'" and are already leaving their mark in real estate and the stockmarket.
Muzaffar Chishti of the Migration Policy Institute, author of "The Phenomenal Rise in Remittances to India: A Closer Look," says the most striking evidence that NRIs are seeing the Indian economy as an opportunity is the rise of so-called "private transfers."
There are two main types of NRI remittances. The most well-known type is the "inward remittance": when an NRI wires or sends money to an individual in India, normally a relative. The other type is the"private transfer" in which an NRI deposits foreign exchange into a rupee account and then spends it inside India.
The little-noticed trend, says Chishti, is how fast private transfers have grown. Between 2000-01 and 2005-06 private transfers grew by 88 per cent, more than double the rate of inward remittances. The former exceeded the latter by $ 2.3 billion last year.
The other trend is that North America is now, by far, the largest source of remittances -44 per cent of the total. The Persian Gulf, which once dominated remittances even 10 years ago, is the source for only 24 per cent. Unlike the traditionally working-class Indian population in the Gulf, the middle-class North American NRIs are more likely to see India as a place for long-term economic investment. Nearly a third of all remittances are over $ 2,200.
In other words, NRIs are bringing in billions of dollars, converting them into rupees and personally spending them inside India. Chishti cites real estate experts as saying 20 per cent of all properties being sold for over $10 million in Delhi are being bought with NRI funds. "In the end, no one knows where or how much NRIs are investing in India," he says.
The amount of money concerned is enormous. Last year remittances to Indiato talled $ 24.6 billion, more than foreign direct investment or foreign institutional investment. Private transfers, which overtook inward remittances only in 2003-04, alone totalled about $ 13 billion last year. India received $ 15..7 billion in FDI equity flows during the same period.
The amount of money NRIs are transferring is still growing. Western Union, the world's largest wire transfer company with $ 4 billion in revenues, says it saw a 102 per cent increase in person-to-person remittances to India last year. In the first quarter of this year, says company spokesperson Erenay Jackson, global transfers to India were "94 per cent higher than the same quarter last year."
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