According to RBI data, foreign exchange spending was about $19.6 billion in FY22 and $12.7 billion in FY21, largely due to subdued travel amid the pandemic. As the pandemic subsided, there has been a surge in outbound travel, which rose to $13.7 billion in FY23, a 97% increase from $6.9 billion in FY22.
By fiscal 2018, Indians were spending less than $1 billion a year on average Month. FY23 data shows that the average monthly remittance is about $2.2 billion Crowd has doubled in five years.
Family support and foreign education were other important categories for foreign remittances. Interestingly, remittances for education fell to $3.4 billion in FY23 from $5.2 billion a year earlier. For total remittances, spending on education accounts for about 13% of spending, while travel accounts for 50%.
The data on record travel spending comes at a time when the government is controlling remittances by imposing a 20% withholding tax (TCS) on travel expenses.
It is expected that there could be some slowdown in remittances due to the 20% TCS. However, with the new tax rules taking effect from July, many are postponing their travel plans to the first quarter to avoid the 20% TCS. As a result, remittance numbers could remain elevated for April through June 2023.
The surge in outbound travel is further evidence of the ‘K’ shaped recovery, with different sectors of the economy performing differently. This is reflected in a sharp increase in luxury spending, including luxury cars and five-star hotel bookings, while there is a slowdown in consumer fast-moving goods (FMCG).
Gifts also have a two-digit share of the total transfers. In FY23, Indians sent US$3 billion as gifts abroad, up 28% from US$2.3 billion in FY22.
Among other things, deposits with foreign banks and investments in foreign equity and debt markets were $1 billion and $1.3 billion, respectively, in FY23, up 21% and 68% year-on-year, respectively .
