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Tuesday, June 22, 2010

India is NRI's destination for Investment

The Economic Growth for next decade is for emerging economies and for markets of the developing world. The BRICK countries (Brazil,Russia, India and China) are front runners in this march of Economic Growth. After recession of 2008 India, China and Brazil have recovered faster than America and European Countries. It is a fact that Greece, Portugal and Spain are still not out of the wood. European market community are trying to find out strategy how to help Greece and Portugal. The Economic growth of U.K. is also not as good as it was during the last decade. In such a scenario India has recovered from Economic turmoil and is expected to grow faster in next decade. The return on investment is expected to be higher in our country.Hence lot of FII are flying into our market for investment for much higher return. In such a situation whether our own children residing abroad should participate in Indian market and take advantage of higher return?


With increasing opportunities for work cropping up worldwide, more and more Indians are opting to migrate to other countries in the search for greener pastures. However, being Indians we still feel the need to stay connected to the place of our birth and therefore, we try to make investments in India through different avenues. Let’s take a look at how Non-Resident Indians (NRIs) can make investments in India. It is understood reliably that after Greece it is Spain which is feeling thepain and pressure of governmental Debt. Spain has declared ,for the first time in the half a century, 5% cut in all wages and salaries of Government employees. This has created turmoil. yet the financial condition is not expected to improve . Some of the economist feel Euro currency might get disintegrated and the4 situation could be salvaged if some of the countries goes back to their own independent old currencies system and can devalue their currencies to improve balance of payments. Under the circumstances it is expected though Indian share market would also fall with European and American market yet in the longer run Indian browses would provide better financial results..


Many of our readers have asked us whether their NRI children can participate in Indian market? The NRIs can make investments in all the investments options which are available to Resident Indians. However, Persons of Indian Origin can only make investments in non-agricultural businesses in the country. One of my friend ,who was Vice Principal of Rodean of girls School of England. She is frok Assam and was a NRI. She started investing through standard chartered Bank, Guwahati since 2004 and by 2008 she got 40% return. Ultimately units were redeemed with profit and was taken back in terms of Pound sterling. This is the exact position how our NRI children can be benefited by investing in India ,Assam. But investment must be for longer term.


It is a fact that even NRIs can invest in shares and stocks by directly subscribing to shares and debentures of Indian companies on a repatriable or non-repatriable basis,through the Portfolio Investment Scheme and through government securities, certificates and units of UTI through remittances from their domestic accounts or remittances from abroad

Many people have asked from which account their children can participate in Indian market ?

An NRI needs to use either a NRE Account (Non-Resident External Rupee Account) or a NRO Account (Non-Resident Ordinary Rupee Account) beside FCNR Account (Foreign Currency Non Resident Account)

It should be clearly understood that the 24% Scheme allows Indian companies, except those engaged in agricultural activities, to issue up to 24% of their shares and debentures to NRIs with repatriation benefits.

Similarly, the 40% scheme allows for purchase of equity, preference shares and convertible debentures not exceeding 51% of the face value of each issue. Repatriation of upto 40% of the new issue is allowed. Under this scheme, NRIs can invest in new projects or in expansion and diversification projects of existing companies.

Jugal Kakoty, a resident of Shillong, have asked as whether his children living abroad can participate in banks deposit and market investment?

We need to explain that NRIs can invest in:Bank Deposits as well as in Secondary markets through Portfolio investment in equity shares/convertible debenture. They can also invest in Mutual funds provided that amount is invested out of NRE/FCNR/NRO account or by inward remittance. They can also invest in Domestic (NRO) funds through deposits in Indian companies (including Non Banking Finance Companies if they are registered with Reserve Bank of India) on non repatriation basis upto 3 years subject to certain formalities to be completed by the concerned company. All the NRI can buy Immovable property provided that the amount is not invested for the purchase of agricultural land, plantation property or farm house and investments are made from fresh inward remittance or existing non resident account .

There are tax benefit for NRI also as under:


* Bank Deposits investment in shares, units of Mutual Funds etc. are exempt from wealth tax in India
* Interest earned on NRE and FCNR accounts is completely tax-free.

It now appears that in case Our NRI children want to earn higher return compared to Europe and America it would be prudent to invest in Emerging market rather than in develop countries. Despite all the rosy picture during next decade in India I would recommend not to invest their entire money in emerging market. It would be prudent to invest only 25% of their surplus money in emerging market like India and balance could be kept invested in the country where they live.It is always easier to handle wealth where they live rather than at a distance place even that is their parents place of resident

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indianist said...

Other than mutual funds, the NRI investment in India is not new but the market now is booming and will remain so for another couple of years without any doubt. NRIs can invest in the share markets directly or through mutual funds efficiently