The Indian diaspora is the biggest in the modern world. And while those 18 million or so individuals may be viewed as a lamentable talent drain, in a country with a population that currently numbers nearly 1.5 billion – half of whom are under the age of 30 – there is less to fear than most. What’s more, Indian migrants do a great deal to enhance India’s economy by annually remitting vast quantities of capital.
India was once again the world’s remittance champion in 2024, with an estimated capital inflow of US$129bn, far outstripping Mexico (US$68bn), China (US$48bn), the Philippines (US$40bn) and Pakistan (US$33bn). Remittances are such a bountiful source of external financing for India that they now exceed capital inflows from foreign direct investment (FDI) and official development assistance combined.
Bumped up by the post-pandemic bounce-back in overseas jobs markets, high-earning Indians are investing in India’s stock markets, where handsome returns are drawing in further investment from that same diaspora. The resulting surge of remittance funds is helping fuel India’s impressive economic development.
A key remittance driver is the search for higher returns
Who they are
India divides its diaspora into three categories: non-resident Indians (NRIs), persons of Indian origin (PIOs) and overseas citizens of India (OCIs). Whereas an NRI is an Indian passport holder who ordinarily resides outside India, a PIO currently holds another country’s citizenship but used to be an Indian national (or whose ancestors were); an OCI is similar to a PIO but with more privileges, such as a lifelong visa, quicker immigration services and the right to become an Indian citizen.
Certainly, NRIs and PIOs both remit money to help their families back home or to build a retirement pot for themselves in India with the ultimate intention of moving back to the country. But those aren’t the only reasons. A key driver of remittances is the search for higher returns on investments.
‘All investments in India have the potential to fetch high returns’
India is one of the few major economies that continues to enjoy robust growth – the country’s Sensex benchmark stock market index has risen steadily from 49,509 in March 2021 to 78,148 in January 2025.
Aniruddha Sengupta, founder of personal investment manager Arthashastra Finsec Providers, says: ‘All investments in India – whether in the capital market, unlisted equities, business ventures such as angel investments and informal private equity – have the potential to fetch high returns.’ He adds that real estate investments in tier 2 and 3 cities (ie those with a population between 20,000 and 100,000) are also delivering high returns.
Big contribution
It is the enthusiastic response of the diaspora to India’s roaring economy that makes their contribution so important. Between April and September 2024, for example, the inflow of money into NRI deposit schemes almost doubled to US$10bn.
And India, in turn, cultivates that inward investment from the diaspora through an enabling tax treatment, which includes a number of double-taxation avoidance treaties. All NRIs/PIOs need to do to start making investments in India is apply for a permanent account number (PAN) and open a non-residential external (NRE) bank account, which converts the funds transferred to it into the Indian rupees required to buy shares in Indian businesses.
Remittances account for a fifth of Kerala’s GDP
NRIs/PIOs are taxed at the same rates as resident Indians on their Indian investments, with tax deducted at source when investments are redeemed. In most cases, NRIs/PIOs have to file tax returns in India and claim tax credits while filing tax returns in their country of residence. Most banks in India have a separate NRI services division to address the specific needs of NRIs/PIOs.
Of course, when making investments in India, NRIs/PIOs need to factor in currency devaluation. Today, the rupee trades at around 85 to the dollar; 10 years back, it was INR61 to the dollar. A weaker rupee impacts NRI/PIO investments, but it has not yet been a major deterrent.
GDP pillar
The economic consequences of remittances are a boon for India. In the southern state of Kerala, for example, remittances rose to US$25bn in 2023, a rise of 155% over 2018, and accounting for a fifth of the state’s GDP of around US$123bn in 2022/23.
In 2025, World Bank economists expect those remittances to continue to increase ‘because of enormous migration pressures driven by demographic trends, income gaps and climate change’. That can only be good news for the Indian economy.
