Indians catch travel bug; spending on foreign tours at $10bn
Talks about recession and economic downturn are rife these days. However, none of that seems to have affected Indians. Per the latest data released by the Reserve Bank of India (RBI), for the first time ever, Indians spent about $10 billion on overseas travel in the first nine months of this fiscal. The record-breaking travel season is expected to continue this quarter too.
Why does this story matter?
The aviation industry was one of the hardest hit by the pandemic. The year 2020 was "the worst year in the history of air travel demand," according to the International Air Transport Association. However, things picked up in 2022. While we saw some marked differences in international travel globally, India's numbers are still fascinating. It makes India an outlier amid the current economic climate.
Indians spent $1,137mn on foreign travel in December alone
Between April and December, Indians spent $9,947 million on cross-border holidays. Out of that, $1,137 million was shelled out in December 2022 alone, as per RBI data. In this category, the previous record was in FY20, when Indians spent $7 billion on foreign travel. The share of travel rose to 51% of international spending in FY23 compared to 35% in FY22.
Vietnam has emerged as a popular location
Now that we have understood Indians are spending more on foreign tours, let's see where they fly off to the most. With traditional favorites such as Dubai and Bali becoming more expensive and crowded, Indians are more attracted to places such as Vietnam. There is increased enthusiasm for exploring newer locations such as Kazakhstan or Abu Dhabi's Yas Island.
Indians sent out $19,354 million between April and December
The first nine months of FY23 saw an increase in overall foreign exchange spent as well. Indians sent out $19,354 million between April and December for education, maintenance of relatives, gifts, investments, and travel. This is close to the $19,610 million sent abroad in FY22. The average monthly remittance of Indians is now around $2 billion.
Government increased TCS on LRS to 20%
There could be a bigger dollar splurge in the current quarter as people try to beat the new tax regime. Under the Budget 2023, the government increased the tax collection at source (TCS) on money sent overseas under the Liberalised Remittance Scheme (LRS) to 20% from 5%. This will affect investments, gifts, and tours exceeding Rs. 7 lakh starting July 1, 2023.
