Why are wealthy Indians taking their money out of the country?

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Why are wealthy Indians taking their money out of the country?

The pandemic, the Ukraine war and the ongoing global economic uncertainty are making them hunt for safe havens for their cash and themselves.

Close-up of an Indian bank official's hands as they count discontinued five hundred rupee notes in Gauhati, India.
The number of dollar millionaires in India has shot up in the last decade, leading to a rise in overseas investments [File: Anupam Nath/AP Photo]

By Charu Sudan Kasturi

Published On 2 Aug 20222 Aug 2022

Amit Ranjan was stunned. For years, financial advisers had recommended only homegrown investment options to the Indian tech entrepreneur and angel investor. But earlier this year, the advice changed dramatically: Ranjan, they said, should invest 20 percent of his portfolio outside India.

“I couldn’t believe what they were saying, so I asked them to repeat it,” he recalled. Then, Ranjan called his friends to check what their advisers were telling them. They confirmed: they too were receiving similar guidance.

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And it is showing.

Wealthy Indians are investing abroad at record rates, data from the country’s central bank reveals. In the 2021-22 financial year, Indians ploughed $1.69bn directly into foreign bank deposits, equity and debt instruments, and buying property outside the country, according to the Reserve Bank of India (RBI). That is almost 40 percent higher than the figure for 2020-21 and nearly six times the $292m that Indians invested abroad in real estate, deposits, debt and equity in 2014-15, when the current government of Prime Minister Narendra Modi came to power, promising to turn the country into a magnet for global wealth.

The country’s own mutual funds have also increasingly sought to invest their customers’ money overseas. So much so that in February, the Securities and Exchange Board of India, the country’s stock market regulator, banned new investments abroad through Indian mutual funds amid fears that a $7bn industry cap would be breached for the first time. That ban was lifted in June, but experts expect the relief to be temporary since the cap remains the same.

And rich Indians are not just sending their money abroad: 8,000 Indian millionaires are also expected to pack their bags and move elsewhere this year, only outnumbered by wealthy Chinese and Russians, according to investment migration consultancy Henley & Partners.

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The outflow of money and millionaires is being driven by factors ranging from the desire to diversify investments geographically to the search for boltholes after the COVID-19 pandemic, said analysts. But this exodus of wealth reduces the pool of investments that could otherwise have been made in India and shrinks potential tax collection. It also 

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