Outward remittances under the Reserve Bank of India’s (RBI) Liberalized Remittance System (LRS) made a strong comeback in the first quarter of FY23 as Indians increased their expenditure on international travel, maintenance of close relatives and gifts.
Latest data for Q1FY23 released by the RBI shows remittances from Indians under the scheme jumped 64.75% to over $6.04 billion from $3.67 billion in Q1FY22 . The amount transferred in T1FY23 is even higher than in T4FY22, where transfers out under the LRS amounted to $5.8 billion.
In April, about $2.02 billion was handed over, followed by $2.03 billion in May and $1.98 billion in June, according to data published by RBI in the August newsletter.
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International travel contributed $2.92 billion of the $6.04 billion disbursed under the LRS in the first quarter of FY23, constituting nearly 48% of the funds disbursed under the LRS program . In the same period a year ago, Indians spent $856.43 million on international travel as Covid-19 restrictions around the world slowed international travel.
Maintenance of close relatives formed the second largest segment after international travel, with Indians paying just over $1 billion in Q1FY23. Money sent in the “gift” category was the third largest segment, with India sending around $770.66 million in the first quarter, up from $489.15 million a year earlier.
Education abroad was the fourth-largest segment, with $738.42 million transferred in the April-June quarter, up from $1.16 billion a year ago.
Under the program introduced in 2004, all resident individuals, including minors, are allowed to freely deposit up to $250,000 per fiscal year for any authorized current or capital account transaction or a combination of the two. The scheme was introduced on February 4, 2004, with a limit of $25,000. The LRS limit has been revised in stages in accordance with prevailing macro and microeconomic conditions.
Outbound remittances under the LRS declined significantly in FY21 as pandemic-related restrictions halted international travel for an extended period. In FY21, India’s remittances under the program stood at $12.68 billion, down 32.38% from FY20, when remittances under the LRS were $18.76 billion.
As Covid-related restrictions eased in several countries in FY22, international travel opened up, resulting in $19.6 billion in outbound remittances under the LRS, which was a record high. Travel contributed about $6.91 billion, more than double the amount spent in FY21. In FY20, however, Indian travel spending was also nearly of $6.95 billion. This indicated that overseas travel spending had reached pre-Covid levels.
Transfer of funds under the LRS scheme
|Note: Amount in millions of dollars|