Indians Tighten Their Belts on Foreign Spending

Under the liberalised remittance scheme (LRS), overseas remittances by resident individuals have seen a significant decline, dropping to $2.3 billion in May 2025 from $2.5 billion in April. This trend reflects a broader governmental effort to curb capital outflows, with increased scrutiny on funds sent under the 'gift' route.

Education and Investments Take a Hit

The decline in remittances is broad-based, affecting various sectors including education, equity, and debt investments. Notably, outflows for equity and debt investments fell by almost half, from $203 million in April to $105 million in May.

Government Measures and Their Impact

Authorities have introduced a tax collected at source (TCS) on foreign remittances and mandated the utilisation of funds sent abroad within 180 days, aiming to prevent Indians from maintaining idle funds in foreign deposits. These measures, along with caps on overseas investments by mutual funds, have constrained avenues for overseas investment.

A Slowdown in Travel Spending

Even the travel sector, which had shown signs of recovery post-pandemic, is experiencing a tempering in growth. Outflows rose slightly from $1.3 billion in April to $1.4 billion in May, but the pace was slower than in previous months.