Rising Indian spending abroad reflects economic trends

• Follow

New Delhi: Usually Indians living and working abroad send money back home. This money sent from abroad is known as foreign remittances. Indians sending money from abroad top the list of those who send money back to their country.

However, you might not know that Indians are not behind when it comes to spending money abroad. This spending contributes significantly to increasing outward remittances. This trend reflects India’s K-shaped economic recovery, where one segment is advancing while the other is declining—meaning the rich are getting richer and the poor poorer.

Now, only those with money already in their pockets or those whose money is increasing will travel abroad. In the past decade, the amount of money sent abroad has increased 29 times. Where in the financial year 2013-14, this figure was 1.1 trillion dollars, it has now increased to 31.7 trillion dollars in the financial year 2023-24.

As we mentioned earlier, the biggest reason for this is that Indians traveling abroad are spending a lot. During this period, foreign inward remittances, which are money sent to India from abroad, have increased by 1.5 times. Where in the financial year 2013-14, this figure was 70 billion dollars, it has now increased to 120 billion dollars in the financial year 2023-24. This clearly shows that the pace of spending abroad and sending money from abroad to India is quite fast.

You can understand this better from a report by Bank of Baroda. According to the report, in the past decade, foreign remittances coming to India have increased at a CAGR of 5.5%. Meanwhile, remittances sent abroad have increased by more than 40% CAGR. The number of middle-class Indians traveling abroad has increased rapidly. The aspirations of the middle class have grown, leading to increased non-essential spending abroad. This year, such spending could increase rapidly.

Let’s understand this better. According to a report by Booking.com-McKinsey & Company, by 2030, Indians will be fourth in spending on vacation abroad.

People Research on India’s Consumer Economy-India’s Citizen Environment, another report by PRICE-ICE, states that by 2030, the middle class will account for 47% of India’s total population, and their purchasing power, i.e., buying capacity, will also increase. The middle class of India is making the largest contribution to spending abroad. Families with annual incomes ranging from ₹500,000 to ₹3 million are considered middle class.

There are many reasons for the increasing trend of Indians traveling abroad. The biggest reason is the attraction of foreign travel. Another reason is that travel in India has become quite expensive since COVID. Airfare has been consistently increasing. Hotel rents have doubled or tripled compared to before COVID. Even restaurant food has become expensive. In contrast, tickets to foreign countries are available at lower prices. Tickets to countries like Vietnam, Sri Lanka, Singapore, Thailand, and the Maldives are cheaper than many domestic routes. This is why Indians are eagerly traveling abroad.”