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- Total outward Remittances, under the RBI’s Liberalised Remittance Scheme, shot up to an all-time high of USD 19.61 billion in the year ended March 2022 as against USD 12.684 billion in March 2021.
- Foreign exchange, including the US dollar and euro, taken out of the country by resident Indians has shot up by 54.60% during the fiscal year ending March 2022.
- What are Remittances?
- Remittances are usually understood as financial or in-kind transfers made by migrants to friends and relatives back in their communities of origin.
- These are basically sum of two main components – Personal Transfers in cash or in kind between resident and non-resident households and Compensation of Employees, which refers to the income of workers who work in another country for a limited period of time.
- Remittances help in stimulating economic development in recipient countries, but this can also make such countries over-reliant on them.
Outward Remittance
- Outward remittance is a transfer of funds in the form of foreign exchange by a person from India, to a beneficiary outside India (except for Nepal and Bhutan) for any bonafide purposes as permissible under Foreign Exchange Management Act (FEMA), 1999.
- The total outward remittances were at an all-time high in FY22 as it made a strong comeback from the previous year’s tepid show because of the Disruptions led by Covid-19.
- The comeback has been supported by Indian’s spending more on international travel and overseas education.
Liberalised Remittance Scheme
- This is the scheme of the Reserve Bank of India, introduced in the year 2004.
- Under the scheme, all resident individuals, including minors, are allowed to freely remit up to USD 2,50,000 per financial year (April – March) for any permissible current or capital account transaction or a combination of both.
- The Scheme is not available to corporations, partnership firms, Hindu Undivided Family (HUF), Trusts etc.
- Though there are no restrictions on the frequency of remittances under LRS, once a remittance is made for an amount up to USD 2,50,000 during the financial year, a resident individual would not be eligible to make any further remittances under this scheme
Current and Capital Account Transactions
Current Account Transactions: All transactions undertaken by a resident that do not alter his/her assets or liabilities, including contingent liabilities, outside India are current account transactions.
Example: payment in connection with foreign trade, expenses in connection with foreign travel, education etc.
Capital Account Transactions: It includes those transactions which are undertaken by a resident of India such that his/her assets or liabilities outside India are altered (either increased or decreased).
Example: investment in foreign securities, acquisition of immovable property outside India etc.
SOURCE: THE HINDU,THE ECONOMIC TIMES,MINT
