WhyAre High Net-Worth Indians Leaving India?
Introduction
India ranks 8th among the world’s fastest-growing High Net-Worth Countries, with a significant rise in wealthy individuals from 2018 to 2023. While this is a remarkable achievement, a surprising trend has emerged: these high net-worth individuals (HNWIs) are increasingly opting for citizenship in other countries rather than staying in India. What drives this migration? Is the Covid-19 pandemic to blame, or are there other factors abroad that attract these individuals? Let us delve into the reasons behind this exodus.
The Rising Trend
India, with 9.7% of its population classified as high net-worth individuals, ranks 8th globally in the list of fastest-growing HNWI countries. While this is a commendable statistic, data from the Indian Ministry of External Affairs reveals a contrasting reality: a significant number of these wealthy individuals are more interested in acquiring citizenship elsewhere. Supporting this, global investment-by-residence firm Henley & Partners reports a sharp increase in investment-based immigration, with a 62% rise in 2020 and an additional 30% surge in just the first five months of 2021. This steady outflow of HNWIs from India is indeed alarming.
Reasons Behind the Migration
Between 2007 and 2017, nearly 38,000 HNWIs left India to settle abroad, with a net worth exceeding $1 million each.A2019 Global Health Migration Review report ranked India second only to China in the number of HNWIs leaving the country.
Better Lifestyle:
So, why is this trend on the rise? Why are wealthy Indians relocating their families, businesses, and lives overseas? The reasons include access to better income sources, an improved lifestyle, and superior healthcare facilities.Additionally, the deteriorating climatic conditions in India push people to seek healthier living environments free from pollution. Investment opportunities abroad are also more diverse, with countries like the USA, UK, Portugal, and Greece offering popular residential visas that attract HNWIs.
Impact of Covid-19 on the Economy:
The Covid-19 pandemic has severely impacted the global economy, and India has not been spared. The World Bank reduced its global GDP forecast for FY 2023 from 4.1% to 3.2%,
with India’s forecast dropping from 8.7% to 8%. The IMF’s World Economic Outlook Report also lowered India’s GDP growth projection for FY 2023 from 9% to 8.2%. These economic challenges have made Indians wary, prompting them to seek better capital returns and diversified wealth opportunities abroad.
Ease of Doing Business fromAbroad:
The Indian passport facilitates resettling abroad, allowing visa-free entry into over 60 nations. While India does not permit dual citizenship, the Overseas Citizen of India (OCI) card enables wealthy Indians to reside, conduct business, and invest in both India and their new country simultaneously.Although India has the potential for dynamic business activities, it still lags in wealth preservation and safety. Before the pandemic, India’s GDP was on a steady rise, but the Covid-19 outbreak led to a decline in per capita income, further pushing HNWIs to seek stability elsewhere.
Effects of Inflation:
India’s economy is currently unstable, with rising energy, fuel, and natural gas prices severely impacting industries, including the automobile sector. For example, Ford recently ceased operations in India due to declining sales caused by fuel price hikes. The ongoing RussiaUkraine war has exacerbated the situation, leading to sharp increases in the Wholesale Price Index (WPI) and Consumer Price Index (CPI). In March, the WPI rose to 14.55%, the highest in seven months, while the CPI increased to 6.95% from 6.07% in February. Given these economic conditions, it is understandable why HNWIs might prefer to invest and operate their businesses abroad, where they feel their investments are safer.
Tax Exemption:
Taxation is another significant factor driving wealthy Indians to foreign shores. In India, the wealthy face high tax burdens, making foreign citizenship attractive as a way to escape heavy taxation. The economy created by wealthy Indians living abroad amounts to a staggering USD 5 trillion, a concerning figure for India. To avoid India’s high individual tax rates, many HNWIs prefer settling in tax-friendly countries like the UAE and Singapore. Some even choose to reside in Dubai, Hong Kong, Luxembourg, and Singapore to minimize their time spent in India and thus reduce their tax liability.
In conclusion, the migration of HNWIs from India is driven by a combination of factors, including better lifestyle opportunities, economic stability, ease of doing business abroad, inflation concerns, and tax avoidance. This trend highlights the challenges India faces in retaining its wealthiest citizens, who are increasingly seeking greener pastures abroad.