Parents are sending more money to their children studying abroad in the current financial year, the data released by the Reserve Bank of India show. This is mainly due to a stable currency and increase in the limit for outward remittances.
Under the liberalised remittances scheme (LRS), outward remittances for studies abroad have jumped to $421 million during the first six months of the current financial year. In the whole of 2014-15, Indians sent only $277.1 million. The LRS covers 10 categories, of which maintenance of close relatives, travel and remittances for studies see the most traction.
There is also a sharp increase in the maintenance of close relatives category, which was $416.8 million during the April-September period of 2015-16 as compared to $174.4 million in the previous financial year.
Under the LRS, resident individuals are allowed to remit up to $ 250,000 per financial year for any current or capital account transactions or a combination of both.
In fact, in February this year, the RBI enhanced the limit under the LRS to $250,000 per person per year. The RBI had reduced the eligibility limit for foreign exchange remittances under LRS to $75,000 in 2013 as a macro-prudential measure when rupee depreciated sharply against the dollar. During 2013-14, the rupee weakened 10.34 per cent against the dollar.
The currency stabilised in 2014-15, following a series of steps by the central bank and the government. With stability in the foreign exchange market, this limit was enhanced to $125,000 in June 2014 without end-use restrictions, except for prohibited foreign exchange transactions such as margin trading, lotteries and the like.
Overall, remittances under the LRS during the first six months of the current financial year were $1,635 million as compared to $1,326 in the financial year 2014-15.
Travel is yet another category where there is a sharp increase in remittances during the period under consideration.
According to the RBI data, outward remittances for travel were $168 million during the April-September period as compared to a mere $11 million during the whole of 2014-15.
“Since the currency has stabilised, it has become more affordable for Indians to spend abroad. The increase in limit by the RBI was also a reason for increase in remittances this year,” said Madan Sabnavis, chief economist at CARE Ratings.
Most of the money goes into travel, further studies
and help for relatives
