Member Perspective: How and Why Indian HNIs Invest Globally

09.03.20 | Research & Analysis

This is a member perspective and the views of the author are their own and do not necessarily reflect the views or position of IIUSA.

By Prashant Ajmera, Immigration Lawyer, Ajmera Law Group

What is Global Investment?

Global or international investing means investing in different global investment instruments so that one’s financial portfolio becomes geographically diversified. This international investment not only diversifies the portfolio but also helps to spread the investment risk among various foreign markets and companies thereby ensuring the security and long term safety of the investment.

What is the Indian Government’s Policy on Investing Globally?

As per the Reserve Bank of India (RBI), the Indian government has opened up doors for investing and remitting abroad as it believes that joint ventures abroad promote economic co-operation between India and the host countries. Since globalization of trade is a two-way process, integration of the Indian economy with the rest of the world with all its attendant benefits is achieved through overseas investment. It is the reverse of Foreign Direct Investment (FDI) and can be termed as Indian Direct Investment abroad.

Thanks to a liberalized economic policy from 1992 onwards and huge foreign investments by Foreign Institutional Investors (FIIs) and Non-Resident Indians (NRIs), India’s foreign exchange reserve now stands at several billion dollars.

This huge fund has permitted the Reserve Bank of India to implement a much liberalized foreign exchange policy. In 2004, RBI allowed an Indian citizen to invest $25,000 US abroad. Over the years, this amount has been increasing steadily and as of today, $250,000 US per year per individual can be remitted/invested outside of India. This scheme is popularly known as Liberalized Remittance Scheme or LRS.

Indian HNIs can certainly benefit from this policy changes. Unfortunately, due to lack of knowledge and awareness regarding investing globally, a negligible number of Indian investors have taken advantage of the LRS.

What are the Types of Assets that Indian HNIs can Invest in Outside of India?

In general, Indian citizens can invest in equity shares, debt instruments, foreign portfolio, real estate, life insurance premium (except term insurance) including the opening of a foreign account abroad for investment. The payment can also be remitted to close relative(s) as a gift or for the purpose of family maintenance. Detailed information is available on the official RBI website…Continue Reading