Economy & Business

The Indian Diaspora’s Impact On The Economy: Know It All Now

The remarkable financial influence of the Indian diaspora

Local economies are benefiting billions of dollars from the migration of well-off Indians who are relocating abroad.

Later this month, Kalyani Nair will throw a Vishu celebration at her family’s residence in a posh Berlin area. The 34-year-old has carefully budgeted about €200 (£171; $218) to cover the costs of the Indian food and sweets she expects to offer to her guests in advance of the Hindu festival of colours on March 25. She’ll buy the Vishu food online in order to save money, and she’ll dress proudly in the traditional clothing she bought when she last visited Palaghat, her hometown.

With a fat budget, Dr. Nair, a microbiologist, and her spouse, a software worker, like to celebrate traditional festivities like Vishu. The pair, who enjoy taking travels every three months and purchasing pricey airfares for their yearly trips back to India, prioritises buying organic foods in their weekly grocery shop and lives in a double-income family with a young daughter and a baby on the way.

“I transferred my investments from India to Germany, so now all my savings are here, and I find it fulfilling to invest money in various stock profiles and exchange-traded funds (ETFs),” says of Nair. We plan to finish the house purchase procedure before the end of the year. We are currently in the process. Our money will be greatly diminished, but it’s also a long-term investment in our future. All in all, I feel more stable and secure financially now that I’m in Germany.

A growing number of Indians, including Dr. Nair, have moved to Germany in recent years. This tendency has been encouraged by more relaxed visa regulations for highly trained workers. A considerable proportion of intelligent and skilled Indians are finding work in profitable fields like maths, science, technology, and engineering. The largest economy in Europe pays its full-time employees a median monthly compensation of €4,974 (£4,253; $5,416), making Indians the highest-earning immigrants.

Amritanshu Pandey and Dr. Kalyani Nair moved their investments from India to Germany, where they are presently buying a home.

One of the most important aspects of the greatest diaspora community ever documented is the tale of Indians in Germany. About 18 million Indians have made the decision to live abroad, with the majority of them residing in North America, Europe, the Middle East, and other regions of Asia, such as Singapore and Malaysia, according to the UN. According to experts, during this expansion, Indians have had a major influence on the world economy, going beyond the borders of their own nation.

According to K. K. Iyer, a professor of economics at Cambridge University in the UK, “the impact is significant.”

The growing number of Indians living abroad are making a variety of local and foreign investments, savings, and spending patterns. The Reserve Bank of India reports that between April 2022 and March 2023, the bank accounts of non-resident Indians (NRIs) residing in the nation received a sizeable sum of $7.99 billion (£6.27 billion). The amount received in the preceding fiscal year, which was £3.23bn (£2.54), is more than double this amount.

“These thirty somethings have a lengthy career ahead of them and are highly sought after by huge organisations due to their ambitions and objectives,” says Kanika Dey.

“Migrants prioritise investments in housing and education for their children, particularly individuals from Kerala in South India residing in the Gulf, as well as IT professionals and academics in the UK,” says Iyer. Bielefeld University sociology professor Kanika Dey claims that by acquiring real estate, Indians in Germany are changing economic trends. This is not how things have always been done in Germany, where purchasing a home is uncommon.

In addition, a large number of Indians living in Germany are investing in mutual funds, stocks, and Bitcoin. The spike in remittance payments to India is one important factor fueling this enormous capital flight. These payouts hit a record-breaking $125 billion (£98.2 billion) in 2023; this was a significant rise over the roughly $100 billion (£78.5 billion) that was paid out the year before. Iyer claims that these numbers can be underestimates and only give a partial picture of the whole economic impact.

“It’s not only about remittances,” he says, “but also about the economic impact of people entering and leaving the country.” They come back, establish a business, mentor people, and then leave again. The diaspora community has significantly impacted many businesses, including the Indian IT sector and the pharmaceutical industry in particular.

With the largest economy in the world by GDP, the United States, is home to the highest-earning ethnic minority group: Indians. According to Pew Research Centre data from 2021, out of a population of about 4.4 million, people of Indian descent who were born outside of the US had an average yearly income of $120,000 (£94,230). Taken as a whole, South Asians make up a sizeable 29% of the Asian buying power in the US, translating into an astonishing $381 billion (£299 billion) in economic influence. Indian expatriates are contributing significantly to local economies through their purchases.

They are excited to use their money to make purchases. Data from DLF Ltd., a premium real estate company situated in New Delhi, shows that a sizable amount comes from real estate investments. Between April and September 2023, 20% of all residences sold by DLF were purchased by NRIs; this represents an increase from 15% during the previous fiscal year. Globally, there is a notable inclination for real estate, particularly in the UK, Singapore, and the Gulf area.

Nair finds resonance in the strategic savings and investment decisions made by this diaspora, which also support capital growth and retention. “In India, it is common for individuals to consider their financial options once they complete their education and secure employment.” “So, the next logical step would be to establish a savings plan,” she says.

In India, about 25% of NRIs choose low-risk investing opportunities. Retirement planning is given top priority by 18% of NRIs in Canada when it comes to their long-term investment strategy and Indian portfolios. This tendency is followed by 16% in the UK and 12% in Singapore. “They’re certainly making smart financial decisions, just like a savvy investor in the United States,” Iyer concurs.

Experts predict that the economic influence of the Indian diaspora will continue to be felt globally in a world where technology and interconnection are quickly evolving, subject to political and visa laws.

The Indian diaspora has the potential to expand and become a major economic force. Iyer says, “I think it will be interesting to see how the diaspora channels their investments back home and participates in joint ventures.” “India’s economic policy going forward will play a significant role in shaping the future, and currently, it leans towards a liberal approach, which is likely to foster further inspiration.”

“These new migrants have the opportunity to freely navigate between various countries due to the implementation of open market policies.” “So, if they’re in Germany today, they could potentially be in the US or Canada tomorrow, as these countries also provide similar citizenship frameworks,” Dutta clarifies. “They are individuals in their thirties with a long career ahead of them, driven by ambition and a desire for success.” Due of their significant contributions and the demand for their work worldwide, many corporations are keen to hire them. “I think these highly compensated, highly trained individuals will keep contributing significantly to the economy.

Sunita Krishnan

Sunita is an experienced business leader who is great at communication, strategy and building things ground up. She has worked widely in the areas of Business and Customer Intelligence, Strategy, and Analytics. She looks forward to work with small and medium size business to help them grow and help large business with projects and initiatives that bring growth through social impact. She works globally and is keen on collaborating with people who are mindful of sustainability, environmental impact and equity. She has a degree in Economics and is an IIM Alumni

Leave a Reply

Your email address will not be published. Required fields are marked *