At around $1 bn, travel accounts for half of outward remittances in May

Outward remittances by domestic residents were stable sequentially at $2.03 billion in May 2022 with close to $1 billion being spent on travel. For April 2022, the figure is about $2.02 billion.

According to Reserve Bank of India (RBI) data, total remittances rose by 61.8 per cent year-on-year (YoY) to $2.03 billion in May 2022 from $1.25 billion in May 2021.

Spending on international travel more than tripled to $994 million in May 2022 YoY from $294 million as Covid-related curbs eased in various countries.

Spending on travel was $6.91 billion in FY22. This is more than twice of the amount spent in FY21. In FY20, however, spending on travel was almost $6.95 billion.

Besides travel, three key heads for spending in May 2022 were maintenance of relatives at $336 million ($237 million in May 2021), gifts at $248 million ($149 million) and studying abroad at $264 million ($429 million). This is under the Liberalised Remittance Scheme (LRS) for resident individuals.

Outward remittances were at an all-time high in FY22. Remittances rose by 54.6 per cent to $19.61 billion in FY22 from $12.68 billion a year ago. They were at $18.76 billion in FY20, and $13.78 billion in FY19.

RBI’s annual report for 2021-22 said it is having a re-look at the scheme and would conduct a comprehensive review of the LRS to address various issues and inconsistencies. At present, resident individuals can freely remit up to $0.25 million per person per financial year.

In 2013, RBI had reduced the eligibility limit for foreign exchange remittances under LRS to $75,000. This was a macro-prudential measure after the rupee came under pressure during the taper tantrum period.

With stability in the foreign exchange market, this limit was enhanced to $125,000 in June 2014 without end-use restrictions.

However, remittances were prohibited for foreign exchange transactions such as margin trading, lotteries and the like.

After a review of the external sector outlook, the limit was enhanced to $0.25 million per person per year.