For most part, India has been a foreign exchange-starved economy dependent on remittances from the vast Indian diaspora and migrant workers. This scenario started to change in 2003 with the global economic boom. Driven by foreign capital flows, India’s forex reserves have only been rising and are currently at a lifetime high. While this inconvenienced the RBI in 2007 when the rupee appreciated 11% on the back of dollar inflows, having robust forex reserves is a blessing as we have one less thing to worry about.
Along with the government’s habitual dependence on remittances to cover the current account deficit, the RBI has always loved a managed float and has dealt with inflows through either intervention or by gradually letting steam off by liberalising outflows. The Liberalised Remittance Scheme was an eventual outcome though it stopped far short of capital account convertibility, which is favoured by investors as it keeps spendthrift governments under check.
LRS helped in diversification of financial assets for high networth investors but what is being witnessed now is much bigger and broader. Since FY16, about $52 billion has been repatriated for travel, studies, personal expenses and real estate investments. This is a fairly sizable sum given that India itself needs capital to build infrastructure.
While Indians must have the choice of spending more on travel, education and investing abroad, a disturbing trend is of businessmen seeking residency and citizenship outside India. As executive editor V Keshavdev reports in this edition’s cover story, this is driven by lack of economic growth and bureaucratic high-handedness. Policymakers have no easy way out but to reignite confidence in India’s economic prospects and regulatory regime.
Among other stories, there is a feature on start-ups who are trying to bring some semblance of order in the unorganised laundry industry. Then, there is an investing feature on Apollo Hospitals. Good times or bad, some businesses are always in the pink of health.