When old mindset and anxieties of the officialdom confront new realities, the aberrations in rules become obvious. One such oddity is the limit of $1 million a year, unchanged for two decades, that NRIs and PIOs can take out of the country after sale of inherited assets, and stocks and properties they had acquired as residents. Till a few years ago, RBI, which had the last word on the subject, used its discretion to allow much higher remittances to someone who had migrated long ago, or a senior citizen keen to spend the remaining years with her family settled abroad for years. All that has stopped, particularly after the pandemic. The central bank gives no reason for rejecting seemingly genuine applications, although, in the absence of capital account convertibility, it is well within its rights to deny large outflows.
However, it’s time the $1 million cap is raised to $5 million, or even $10 million. Fears of capital flight from such remittances seem overstated in an economy that has recorded one of the highest growth rates, accumulated foreign exchange reserves of over $600 billion, and attracted large investments from overseas portfolio managers, as well as long-term funds from offshore VC funds, private equity houses and strategic players.
If the country has emerged as a preferred investment destination as New Delhi and RBI claim, it would be safe to assume that such fund transfers by NRIs and PIOs are driven by personal reasons, and not by the lure of a higher return in another market. If, indeed, India’s time has come, the authorities should not be perturbed by a dip in the rupee, or citizens surrendering their passports. A mature state should not hold on to outdated regulations that betray regulatory paranoia.
