India’s Dollar Economy (Part 3)—Rs 50 Lakh Cr 'Flee' with Dollar-Millionaires!

What if this was invested in India, and not in Dubai/Singapore/Europe/America/Wherever, asks Raghav Bahl.

In this third and final piece of our trilogy, we turn our gaze towards ordinary people and their “dollar actions".

(Photo: Aroop Mishra/The Quint)

In the first episode of our trilogy on India’s Dollar Economy, we examined the highly curious, oxymoron-like phenomenon of “Zero Net FDI” in the world’s fastest growing large economy. We discovered that the “zero” was a somewhat problematic half-truth, but not a disaster. Fresh Inward FDI (Foreign Direct Investment) is at record highs, but it’s not keeping pace with GDP growth. It’s also counter-balanced by two opposing forces—huge outflows of investable dollars by foreign and domestic companies. So, the picture is awfully grey, encouraging and distressing in about equal proportions.

As against this, our second episode, on the legal protections given to foreign investors, showed a severely black/white portrait. The Indian government had devised a 2016 Model Business Investment Treaty (BIT) Framework, leaving the foreign investor vulnerable and disarmed against whimsical taxation and unfair policy changes.

Almost all our treaties—over EIGHTY—with critical trading partners were scrapped; and the aggrieved countries are unwilling to conclude fresh treaties under the new norms. Independent estimates showed a gut-wrenching 30 percent fall in FDI caused by this unilateral—some would call “brazen”—treaty action by India.

And now, in this third and final piece of our trilogy, we turn our gaze towards ordinary people and their “dollar actions”. This is the story of how Indian citizens and non-resident Indians (NRIs)—i.e., people in flesh and blood, not inorganic/fictitious “legal persons” like corporations—are impacting India’s Dollar Economy.

LRS & Ordinary Migration—No Alarms!

People influence dollar inflows in two ways. One, by moving them in and out of their bank accounts. And two, by moving their bodies and families in and out of India, principally by emigrating and taking their wealth to another country.

The only way Indian residents can remit dollars is via a Liberalised Remittance Scheme (LRS) which allows each one of us to send $250,000 every year to travel to foreign shores, educate our children, give gifts to overseas relatives, get medical treatment, or whatever.

So, if you are a family of four living in India, and have Rs 10 crore to spare, you can remit or spend $1 million every year!

LRS outflows have grown six-fold over the last decade, from about $5 billion to nearly $30 billion last year. Is that a suspicious surge? Mercifully not. Most of the money—about 60 percent—is spent on foreign travel, which is a hugely aspirational quest, even for simple middle-class families. Predictably, education comes next, with about 20 percent used there. The rest is spread over gifts, medical treatment, and investments in property and financial assets. All of this is rational behaviour as urban Indian families get wealthier. Thankfully then, the LRS track raises no alarm.

Now to the dollars that “physically” accompany emigrating Indian residents. The most precise demographic quantity is Indians renouncing their citizenship.

The total registered renunciations are nearly 1.6 million over the last decade. But it would be erroneous to use this as a proxy for emigration since the final cut of the umbilical cord with “home” usually comes after several years of living away.

Another estimate, much fuzzier, shows a net decadal increase of 2.5 million in the stock of Indian-born people living abroad from 2015. Since many may have also returned or died in this decade, demographers estimate that over 5 million people may have emigrated, at an average rate of about 500,000 every year over the decade. But to estimate the wealth they could have taken with them is a mighty challenge.

About 2 million were students. Another 2 million were skilled professionals and their families. Half a million small business owners may also have migrated. Most of them are likely to have left behind their family house and relatives, i.e. wealth that did not migrate with them. Clearly, none of these people are thought to have taken sacksful of dollars with them.

What’s more, many would have improved their economic means in foreign lands. If anything, they could be principal contributors to the swelling stream of over $100 billion that are steadily being sent to India by overseas Indians, year after year. So, this emigration stream is not a huge dollar burden on the country.

Here's the Nettlesome Cohort—Departing HNIs

Now to the most nettlesome category, i.e., High Net Worth (HNI) households. Because if a household with $50-100 million of domestic wealth moves abroad, the probability that eventually over half this wealth will also get sucked away to the “new home country” is quite high. Is there a way to make a scientific guesstimate?

Henley/New World Wealth’s 2025 report claims that 3,500 Indian millionaires, worth $26.2 billion, emigrated in 2025. This is the most “validated” data point we can work with. A simple division yields a critical norm, i.e. each of these departing millionaires must have had an average wealth of $7.5 million.

If 3,500 dollar-millionaires left India in 2025, do we have an estimate for the total departures over the last decade? Yes, there’s popular consensus that the number could be 50,000, including negligible emigration during the COVID years. Now, if we blindly multiply 50,000 by $7.5 million, we hit our “quick estimate” of $375 billion of wealth owned by this cohort.

Such wealthy people are not expected to “clear the stables” in their motherland. Most would want to retain a house, business, or other assets in India.

If we make a reasonable assumption that 60 percent is eventually sucked out, and 40 percent stays within India, we have a defendable proxy, i.e. about $200-225 billion of millionaire wealth has, or soon will, “flee” from India, along with its owners.

This is a sobering reality! Because these $200-225 billion are EQUITY capital in the hands of the migrants. Even by a conservative debt:equity standard of 2:1, it adds up to over half a trillion dollars of investable capital. That’s nearly Rs 50 lakh crore!

What if this was invested in India, and not in Dubai/Singapore/Europe/America/Wherever? That’s the ugly question beguiling India’s Dollar Economy.