Why Should NRIs Invest In India?

Why should NRI make an investment in India’s Growth Story?

Over the last decade, India has established itself as the fastest-growing economies in the world6. The country’s industries are growing, the economy is stable and is also poised to grow6. Per reports of May, 2023, within the next 15 to 20 years, India is anticipated to become one of the top three economies of the world1. The annual economic growth rate is projected at 6% per annum over the next decade¹.

Other numbers that depict the growth story of India are as follows –

• India is ranked 40th in the Global Competitive Index 2023²
• India has jumped to the 40th rank in the Global Innovation Index, moving 41 places upward over the last 8 years²
• Over the next 5 years, India would have a higher economic influence in the Asia-Pacific region².
• The centre for global maritime trade would be moved to the Indian Ocean from the current Pacific region. This would make India and China the largest manufacturing centres of the world by 2030²

These statistics denote the future potential of India in the economic and industrial landscape. The Indian economy is resilient and is showing steady growth, specially post pandemic³.

All these factors make India a lucrative investment avenue for NRIs who want to capitalize on the country’s growth potential. Some of the other reasons that make India a good investment avenue for NRIs are as follows –

Why do NRIs invest in India?

1. Portfolio diversification

By investing in India, NRIs can diversify their portfolio across geographies. This lets them benefit from the growth of the Indian economy. Moreover, with portfolio diversification, NRIs can enhance the return potential of their investments and also spread out the investment risks across different investment avenues and geographies.

2. Good return potential

The investment avenues available in India have a good return potential. Perhaps this is why, in 23 years from April 2020 to September 2023, the Foreign Direct Investment (FDI) in India amounted to $953.143 billion2. Thus, NRIs may get good returns on their investments and grow their wealth.

3. Meeting financial goals

The investment avenues available in India can help NRIs plan for their financial goals. For instance, if an NRI is planning to settle in India after retirement, he can invest in a suitable investment option to create a retirement plan. Life insurance pension plans may be a good choice. The deferred pension plans help NRIs save for their retirement and promise guaranteed^* lifelong pensions after maturity.

Similarly, a term insurance plan may help in replacing their income in the case of their untimely demise while a child-based insurance plan secures their children’s future.

4. Tax benefits

Lastly, NRIs can claim tax benefits by investing in eligible investment options available in India. The income that NRIs earn in India is taxed in their hands. By using tax-saving investment avenues NRIs can reduce their tax liability. For instance, if they buy a life insurance policy in India, the premium paid for the same is allowed as a deduction under old tax regime, as per Section 80C of the Income Tax Act, 1961 up to ₹1.5 lakhs subject to specified terms and conditions⁴.

Moreover, life insurance benefits also save tax as you can claim exemption on them if the associated conditions are satisfied.

How to invest in India?

If you are an NRI and are looking to invest in India, consider the following things before investing –

• Assess your financial goals. The investments should align with the identified goals. Also, assess the horizon of the goals and the corpus required. This would help you figure out how much to save and for how long.
• Understand the tax implications of the investment avenues you choose
• There will be an exchange rate risk when you invest in India
• Your investments should match your risk profile. If you are a risk-aggressive investor, you can invest in equity-oriented investment avenues like equity funds of ULIPs. However, if you are risk-averse, you may choose avenues that give stable returns, like an endowment plan
• You will need a Non-Resident External (NRE) or Non-Resident Ordinary (NRO) bank account to invest in India⁵. If you have an NRE account, you can make deposits in foreign currency which would be converted to Indian Rupee (INR) and then you can invest. Your Indian income needs to be deposited in the NRO account. Investment can be done from either.
• You can invest online from any country you are residing in.

Summing it up

India is a developing economy that has shown strength even when the world is in turmoil. As an NRI you can invest in India’s growth story and benefit from the economic development that is expected to occur in the future. The government is also easing the investment process for NRIs allowing you to invest without hassles. So, assess your needs and then invest in suitable avenues for portfolio diversification and unlock India’s growth potential.

Reference

1. https://www.financialexpress.com/business/industry-nri-investment-in-india-what-is-the-way-forward-3107396/

2. https://www.investindia.gov.in/why-india

3. https://www.businesstoday.in/personal-finance/news/story/60-of-nris-from-australia-canada-usa-singapore-and-canada-consider-settling-in-india-post-retirement-survey-396848-2023-09-05

4. https://cleartax.in/s/life-insurance-taxability

5. https://www.moneycontrol.com/news/business/personal-finance/investing-abroad-series-use-nro-account-for-family-expenses-and-nre-account-for-investments-9152651.html

6. https://www.worldbank.org/en/country/india/overview#:~:text=With%20a%20population%20of%20more,emerged%20as%20a%20global%20player.