MAHESH PAI highlights different reasons on why NRIs should invest in India
The enhancement in foreign direct investment in the Indian market is becoming much more conducive for investment – not just for Indians, but also for the NRIs. If you are an NRI you need to understand the benefits of investing in Indian markets and learn more about other options available.
The Indian economy has consistently ranked in the top five fastest growing economies in the world over the past three decades. The stability in the economy reduces the risk of investment on the other hand. An economy with more than 130 crores of people holds immense opportunity in terms of investment returns in most sectors. Even with the pandemic in the backdrop, the Indian economy is projected to grow by 8.8% according to the IMF.
Some Indian economy facts:
1. When it comes to purchasing power parity, India is the 3rd largest economy to make the list
2. Fifth largest in terms of GDP – Better than Canada and Russia
3. Foreign exchange reserves in India increased to US$ 617.65 billion as of March, 2022.
So why should NRIs invest in India?
The Value of Currency
Over the last two decades, tremendous industrial and economic development has brought about a paradigm shift in the country’s financial landscape. Even though the Indian economy has been booming over the past few decades, the power of currencies such as the USD, Pound sterling, and the Euro has steadily increased as compared to the rupee. This would mean that you will be able to earn better returns.
Diversification
One of the greatest advantages of investing in India is the range of options available for investing your money. You can diversify your portfolio with investments such as equity funds, debt funds, liquid funds, stocks, and more across sectors and industries. There are goal-based saving plans (for growth, legacy planning or retirement), capital guarantee solutions, guaranteed return plans and annuity etc. if you don’t want the market volatility to impact your money at all, you could opt for guaranteed return plans that come with zero risk. You also get a higher rate of interest than FD, which is also tax-free. While FD stands at an average 5 per cent interest rate, these plans could get you up to a 6-6.5 per cent rate. So, if you invest for say, 10 years, you could choose your return as fixed monthly income or a lump sum amount.
Alternative Assets
The beauty of economic progress and growth is that newer and better forms of investment options can develop and prosper. NRIs get a lot of taxation benefit and there a few investment plans / products which are tax free too. This gives an upper hand while planning for your investments.
Better Interest Rates
The interest rates are higher in India as compared to countries like the US, Japan, Saudi Arabia and Australia. Especially considering the past year, India has surpassed many developed economies in terms of return rates. From September 2020 to September 2021, Indian markets have delivered up to an impressive 53 per cent return compared to 25-30 per cent in other countries. Even the Indian banks provide better interest rates than the US, Japan, China, and many other countries! Sounds surprising, right? But most NRIs aren’t aware of this fact and end up letting their money stagnate.
Setting up a retirement plan either by investing in mutual funds, stocks, annuity plans, pension plans is easier and cheaper in India as compared to countries like the US. Many NRIs want to return back to India for their retirement but their biggest problem is income. They end up using up all their savings in buying real estate expecting a regular rental income or try to start a business and fail most of the times as they were into a service background earlier and have no knowledge about running an Indian business now. Starting your investments early for the purpose of retirement helps a long way.
Historical market returns
The historical trends suggest that long term investments in the Indian market can give better returns. Earlier in the 1950s India was a poor economy with low purchasing power. Indians did not invest anywhere. Later in the 1990s due to liberalisation and privatisation the purchasing power of the Indians went on top. People now started investing in real estate, FDs and sooner in the equity markets, as well. After 2016 demonetisation, people started investing more in the financial assets than physical assets, the growth of the economy suddenly increased. Today, the Sensex even touched 60,000 points, many people made money but many lost as well. Consult a professional financial planner to mitigate the risk and make profits, as well.
Earlier you invest, the better
There have been projections that India is poised to grow into a $5 trillion economy by 2024-25. It is a hard fact that investments reap better returns over a longer period of time. Also, if you want ripe returns for a one-time event like your child’s education or marriage or your own retirement, starting early is the key.
If you are putting off your Indian investments for a later date because the process is complicated, think again. India has outperformed the markets of other developed countries like China and Japan, as well.
These numbers are a welcome change for Indians around the world who have been looking to invest in India’s growth story. Keeping in mind the inflation, the education or the medical expenses will go considerably up by then. If you delay investing today, you will either have to make up for it by investing a higher amount every month or by losing out on returns. So, if you are wondering what the right time to invest in India is, the answer is no.
The writer is an investment consultant and business coach. Email: mahesh@maheshpai.in
