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May 26, 2026
Viren S Doshi

India's Outward Remittances and Foreign Capital Repatriations: Draining Forex or Reflecting Global Aspirations

Harnessing Domestic Savings in a Forex-Conscious Era Overview India is the world’s largest recipient of inward remittances, with inflows reaching record levels of approximately USD 129 billion in 2024, over USD 135-136 billion in FY25, and continuing strong momentum. These stable private transfers bolster the current account, support the rupee, and help finance imports. However, outward remittances by residents and large-scale repatriations by foreign investors represent significant counterflows that warrant attention for Balance of Payments (BoP) management and foreign exchange (forex) conservation. Liberalised Remittance Scheme (LRS): Individual Outward Flows The Reserve Bank of India (RBI) introduced the Liberalised Remittance Scheme (LRS) in 2004. It permits resident individuals (including minors) to remit up to USD 250,000 per financial year (April-March) for permissible current and capital account transactions, such as foreign travel, education, medical treatment, family maintenance, gifts, donations, and overseas investments (equity, debt, property). Recent Trends (USD billion): FY23: ~USD 27 billion (record at the time). FY24: Peaked at ~USD 31.74 billion. FY25: Declined 6.85% to USD 29.56 billion. FY26: Further moderation to ~USD 28.9 billion (full year estimates), with April-December down 4.1%. FY25 Key Breakdowns (approximate): Foreign Travel (tourism, business): USD 16.96 billion (~57% share), the dominant component despite a marginal decline. Overseas Education (student fees and related): USD 2.92 billion (down 16% YoY from USD 3.48 billion). Maintenance of Close Relatives / Family Support: ~USD 3.72 billion. Gifts: ~USD 2.93 billion. Investments (equity/debt, property): Growing but variable, with monthly figures in hundreds of millions. Travel consistently accounts for over 55-60% of LRS outflows, while education has moderated with the improvement of domestic opportunities. FDI and FPI/FII Repatriations: Major Capital Account Pressures Beyond individual LRS flows, significant outward pressures arise from foreign investors repatriating profits, dividends, and capital. Foreign Direct Investment (FDI): Gross FDI inflows remained robust at ~USD 81 billion in FY25 (up 13-14% from the prior year), led by services, manufacturing, and energy. Net FDI plummeted 96% to just USD 0.4 billion (or ~USD 353 million) in FY25 from USD 10.1 billion in FY24. This reflects higher repatriations/disinvestments and increased outward FDI by Indian companies. Repatriation and Disinvestment: Surged to a decade-high USD 51.5 billion in FY25 (up from USD 44.5 billion in FY24). This indicates a maturing market offering smooth exits but draining forex. Foreign Portfolio Investment (FPI, formerly often referred to as Foreign Institutional Investors - FII): Highly volatile "hot money." Recent years have witnessed large net outflows or profit-booking amid global uncertainties. FPIs repatriate capital gains, dividends, and interest after applicable taxes, amplifying rupee volatility during risk-off periods. These repatriations, combined with LRS and other outflows, contribute to pressure on the current account and forex reserves (which stood robustly around USD 690-700 billion in recent periods, providing comfortable import cover). Economic Impacts Positive Aspects: Outward flows enable global mobility, skill acquisition through education abroad, business expansion, and portfolio diversification. FDI/FPI inflows historically bring technology, best practices, market depth, and liquidity. Repatriations signal an open, mature economy attractive to long-term investors. Challenges: Forex Drain and Rupee Pressure: Increased demand for foreign currency (primarily USD) can contribute to depreciation, raising the costs of imports like oil and electronics. Current Account Strain: Exacerbates deficits alongside India's merchandise trade gap. Opportunity Cost: In a high domestic savings-based economy, these funds could alternatively fuel local investments in stocks, companies, infrastructure, or mutual funds, leveraging India's strong growth potential and generating compounded domestic returns. Rapid profit repatriation reduces the multiplier effect of foreign capital. Strategies to Control or Moderate Outflows In an era of prioritising forex conservation for critical needs (imports, debt servicing, defence, infrastructure), balanced approaches are essential: Strengthen monitoring via PAN/Aadhaar linkage and purpose-based reporting. Incentivise domestic alternatives: Enhance "Study in India" and quality higher education, promote domestic tourism, and create attractive local investment avenues with tax benefits. Encourage rupee-based trade and stable long-term FDI over volatile FPI. Use macro-prudential tools selectively during stress periods, avoiding blunt capital controls. Leverage high household savings by deepening equity culture and corporate bond markets. Targeted nudges toward retention are preferable to outright restrictions, which could drive flows underground. Taxes on Outward Remittances and Repatriations: Current and Potential Enhancements Current Framework (LRS): Tax Collected at Source (TCS) under Section 206C(1G) of the Income Tax Act acts as provisional collection, adjustable against final tax liability. Threshold: Nil TCS up to INR 10 lakh per financial year (per PAN) for most purposes (updated in recent budgets). Education (non-loan) and Medical: Often 2% above threshold (reductions applied in 2026 updates). Other purposes (travel, investments, tours): Up to 20% above threshold; overseas tour packages sometimes at a flat 2%. Education loans from specified institutions are exempt. On FDI/FPI Repatriations, Dividends, and Gains: Dividends: Withholding tax ~20% (plus surcharge/cess; mitigated by Double Taxation Avoidance Agreements - DTAAs). Interest on Debt: Concessional rates in many cases (e.g., 5% for certain bonds) to 20%. Capital Gains (for FPIs): Short-term and long-term rates apply (e.g., long-term equity often 12.5% without indexation in recent rules); self-assessed before repatriation. Feasible Selective Tax Hikes and Revenue Potential: Tiered higher TCS on non-essential/luxury LRS outflows (travel, large investments) while protecting education and medical. Additional surcharge or levy on short-term FPI exits or large profit repatriations. Modest increases in withholding on portfolio dividends/interest, with safeguards for long-term FDI. Exit taxes or lock-in incentives to encourage longer investment tenures. Revenue Estimates: With LRS outflows at ~USD 25-30 billion annually (~INR 2-2.5 lakh crore) and FDI/FPI repatriations in the USD 40-50+ billion range, effective collections at 5-10%+ on high-value portions could generate INR 5,000-20,000+ crore from LRS alone. Selective hikes on repatriations could add thousands of crores more. These revenues, though modest relative to India's overall tax base, could be ring-fenced for domestic education infrastructure, skill development, or forex stabilisation funds—aligning with a savings-led growth model. Trade-offs: Higher taxes risk deterring fresh inflows, reducing market liquidity, or encouraging avoidance. Evidence from past TCS adjustments shows improved compliance with moderate outflow moderation. Calibration is key to maintaining "ease of doing business." Conclusion: Prudent Management for Sustainable, Self-Reliant Growth Outward remittances under LRS and repatriations of FDI/FPI returns reflect India's integration into the global economy and rising middle-class aspirations. Yet, in a savings-rich economy with immense domestic growth potential, moderating non-essential drains through incentives, monitoring, and smart, selective taxation can generate revenues, conserve forex, and channel capital toward local opportunities. Policymakers must balance individual freedoms and openness with national priorities like rupee stability and external sector resilience. As India pursues developed-nation status, wise management of these flows will strengthen its economic sovereignty while sustaining its global footprint.

May 25, 2026
Venkatesh Kikkeri

The Sky Warriors: Operation Sindoor Unveiled

Amidst the barrage of Bharat’s missiles striking at the heart of Pakistan from 01:05 AM on 07th May 2025 till around 88 hours thereafter, sensationalism and cacophony ruled the roost in most of the English and Hindi television news channels. While fighter jets and armoured tanks made a dramatic entry into the chaotic news studios, many high-decibel journalists even declared the capture of Pakistan’s Karachi, the port city, which, as we all are now aware, was never the reality. However, one defence journalist at New Delhi Television (NDTV) was a class apart. His dispassionate reportage, as always, was separating the chaff from the grain. If a unique algorithm existed which helped disseminate information in the vicious world of disinformation, especially at the time of a war, it had to be this defence journalist. His reportage ever since the 1990’s till date has covered many a war from Iraq to Ukraine, Libya to Afghanistan and from Operation Vijay in Kargil to Operation Sindoor. He is none other than Vishnu Som, a veteran at NDTV and an expert par excellence in matters defence, military, military aviation and weapon platforms. His debut book, “The Sky Warriors – Operation Sindoor Unveiled”, published by Juggernaut Books, provides a gripping account mainly of the offensive air operations by the Indian Air Force (IAF) in Operation Sindoor and the intense air battle that ensued in the now-famous 88-hour war. Vishnu Som’s book is backed by firsthand “accounts from the cockpit” of several IAF Officers who either pressed that dreaded pickle button over the throttle of their respective fighter jets to destroy targets deep inside Pakistan or were guiding an array of offensive/defensive weapons from the ground/air as a part of the Integrated Air Command and Control System (IACCS) to counter Pakistan’s response and guarding Bharat’s airspace during Operation Sindoor. Apart from his own excellent research, the insights penned by the author from his interviews with the IAF personnel, including the personnel from the top echelons of the IAF, forms the crux of his book. This book by the author can be considered as very significant for two critical reasons. First, the official military history of Bharat post 1947 is scarce. Chronicling is in itself a major lacuna. However, excellent books authored by several veterans, strategic experts and defence historians are available in the form of autobiographies, biographies, memoirs, detailed accounts of combat operations, military campaigns, battles and wars. But these works fail to capture the ‘moment and the immediacy of the eras’ which they attempt to chronicle. Putting it in simple terms, the ‘as it happened phenomenon’. The works have been published belatedly, sometimes the delay spanning even decades. Because of this inordinate delay in chronicling, the authors may be prone to the bias of hindsight or being influenced by shifts in policy or political thinking. To quote some prominent works: “My Years with the IAF”, the memoir of Air Chief Marshal P. C. Lal, who retired during January 1973 was published posthumously in 1986 “On the Wings of Destiny: An Autobiography” by Air Chief Marshal Dilbaugh Singh was published posthumously in 2010 The book on the 1965 Indo-Pak Air War titled “The India-Pakistan Air War of 1965” and authored by P V S Jagan Mohan and Samir Chopra was published in 2005 “Eagles Over Bangladesh: The Indian Air Force in the 1971 Liberation War”, chronicling the air campaign of the Indian Air Force during the 1971 Indo-Pak War was published in 2013 In the above context, Vishnu Som’s book, published just before the first anniversary of Operation Sindoor, is a significant milestone. Second, the author was provided access to interview the IAF personnel who actually played a part in Operation Sindoor. Though critical operational details have not been revealed during the interviews, the author has managed to access enough information to provide a broad understanding of how the operation was carried out, which, in many of the earlier operations, was not at all available. This is a major departure by an institution when compared to earlier times. It may be noted here that Operation Sindoor is paused and not yet concluded. Thus, his work can be termed as a semi-official account of the air battle during Operation Sindoor, published before the operation’s first anniversary, which is a coup of sorts by the author. Another important reference point for the reader to understand the significance of the author’s work is that we still have very little information let alone authoritative work on the 2019 Balakot Air Strike by the IAF that destroyed the Jaish-e-Mohhamed terrorist camp on Jabba Top and the subsequent air battle which led to the downing of an F-16 of the Pakistan Air Force by a MiG-21 of the IAF piloted by Wing Commander Abhinandan. Coming to the book per se, the narration runs linear, commencing from the description of the brutal, tragic and unfortunate terror attack on innocent tourists at Pahalgam on the 22nd April 2025 and concludes with the gripping account of what happened on the 10th May 2025, which led to the Pakistani DGMO desperately calling the Indian DGMO begging for a ceasefire. The author, with his impeccable research, stitches together the reasons for the destruction of Pakistan’s multiple Air Force bases involving precision strikes by the IAF using standoff weaponry. Through his expertise on weapons and weapon platforms, the author gives the reader a good indicator of what weapons may have been used and the platform from which they would have been likely launched. The IAF has to date not indicated or acknowledged the weaponry used either by the target or generally. There is an entire appendix on the weaponry and the platform used by each side during the 88-hour war. One can also get to know how modernised the IAF is and visualise how future wars on the sub-continent may look. As we are aware, it took just 88 hours for the IAF to degrade the Pakistan Air Force, inflicting enormous damage to its air bases and air defence, loss of air assets like fighter jets and electronic aircraft etc. This also has a huge financial impact on Pakistan, for it involves considerable cost to rebuild for an economy which is already in doldrums. The author’s discussion with the IAF personnel gives the reader a peek into the peak of professionalism, which is imbibed in the IAF air warriors through continuous training and practice, whether it be in maintaining secrecy or operating in a need-to-know environment or conducting business as usual without letting out an iota of doubt on an impending operation of the magnitude of Operation Sindoor. The author also cites a few incidents of emotions of the air warriors as well as those of the normal citizen towards the armed forces. As one can understand from the book, every single individual who fought for Bharat shared a common trait of dedication with an emotion of determination, passion and optimism. These emotions drive them to deliver their best for the cause of the Nation. The author’s conclusion - “While Operation Sindoor demonstrated that limited conventional war between nuclear-armed states is possible, it also proved something else: the threshold beneath the nuclear umbrella is real, but precarious. Pakistan’s nuclear threats didn’t deter India. India’s conventional superiority forced Pakistan to seek a ceasefire. But the underlying tensions – terrorism, territorial disputes, nuclear brinkmanship – remain unresolved” – is objective and logical. The book is engrossing and at times, evocative. In this age of social media and OSINT, where information travels faster than light and truth will be the casualty even faster, the author manages to arrest the reader through his truthful account. Though small and compact, the book certainly delivers a punch through its racy narrative. However, the photographs carried in the book could have been much clearer and stacked together as a separate section.