Indian travellers are loosening their purses dramatically, spending almost USD 10 billion in the first nine months of the ongoing fiscal year
The data released by Reserve Bank of India released data on outbound remittances under the Liberalised Remittance Scheme in February 20, that showed that Indians are spending approximately USD 1 billion per month on foreign travel, which is substantially higher than pre-Covid levels, indicating that not only had outbound travel begun in full force, but also displays the strength of the revival and the desire or capacity of the Indian travellers to spend more money on travel.
Introduced by the Reserve Bank of India, Liberalised Remittance Scheme allows the Indian resident individuals, including minors, 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 permissible remittances include, expenses related to travelling (privately or for business), medical treatment, study, investment in shares and debt instruments, and buying immovable properties in the overseas market.
The RBI data further shows that the, outward remittances under LRS for travel were USD 6.95 billion in 2019–20 and USD 4.8 billion in 2018–19, respectively, but plummeted drastically to USD 3.23 billion in 2020–21, owing mostly to travel restrictions in response to the COVID–19 pandemics. However, during the April-December period of 2022-23, the outward remittances under the LRS for resident individuals towards ‘travel’ was USD 9.95 billion.
“As the data shows, India is emerging as a strong economic power, and it also shows the purchasing power parity of the Indian middle class has seen a tremendous rise that is increasing day by day. This further depicts the dynamic success of the Indian economy, which continues to grow despite being disrupted by the Covid-19 pandemic. This could be attributed to various measures implemented by the Indian government in recent years, particularly those aimed at strengthening the middle and lower middle classes, agriculture, and the MSME sectors,” Suvrokamal Dutta, an economic expert, tells India Outbound.
“The number of visitors went down drastically during the lockdown imposed because of the Covid-19 pandemic. However, since the travel restrictions have been lifted, people have started moving freely around the world, including Indians. Indians primarily prefer to travel to Dubai, Thailand, Singapore, Sri Lanka, Switzerland, Indonesia, Nepal, Canada, the USA, and Europe,” Ishaan Sood, a travel agent from Delhi tells India Outbound.
But it is not an entirely rosy picture as instead of removing a tax on outbound travel, as has been demanded by the industry for over two years, Union Finance Minister Nirmala Sitharaman, in her last budget speech has proposed to hike the Tax Collected at Source (TCS) rate on overseas tour packages from the current 5 pc to 20 pc from the next fiscal year. The industry experts say that the hike is certain to hit the revival and growth of overseas travel by the Indians.
“The move would definitely influence the expenditure on tourism as the taxes have been increased by four times, so does the price of the tour packages. The fares and other expenses have also been increasing due to rising inflation. Given the fact that people are excited to tour the world post-Covid as they couldn’t do so during the pandemic, this may, however, help the government in generating tourism revenue,” adds Sood.
But Dutta disagrees and says that the recovery of the economy and travel is strong enough to overcome this tax hike. “The spending power of the Indian middle class and the upper classes has increased rapidly in the past few years. The Indians have more money to spend, so you can see that both domestic and outbound tourism have increased rapidly. A boost in tourism has a multiplier effect, which further helps in the acceleration of the economy,” Dutta adds.
