WHY IN NEWS ?
- According to Henley and Partners, India is expected to lose 6,500 high net-worth individuals (HNWIs), worth $1 million or more this year.
EXTENT OF INDIA’S WEALTH DRAIN:
- In 2023, India will be the second-biggest loser of millionaires, after China’s net outflow of 13,500.
- Last year, India lost 7,500 HNWIs, the 3rd highest after China (10,800) and war-wrecked Russia (8,500).
- Between 2013 and 2022, India lost 48,500 HNWIs, says data compiled by Henley and Partners.
- The report said “these outflows are not particularly concerning as India produces far more new millionaires than it loses to migration”.
- That is true: the net loss in 2023 is just 1.9% of the total number of resident millionaires, 344,600.
- However, the overall number, too, saw a slight decline from last year’s 357,000.
WHY ARE INDIA’S HNWIs LEAVING COUNTRY ?
- According to report,“Prohibitive tax legislation” and “convoluted, complex rules relating to outbound remittances”.
- Political stability, low taxation, and personal freedom have always been key metrics for millionaires when it comes to deciding where to live.
- This year’s union budget reduced the surcharge for those earning more than ₹5 crore, cutting the top rate of tax from 42.7% to 39% under the new tax regime.
- It might have come as a relief but there are other concerns.
- For instance, the recent increase in tax collected at source from 5% to 20% on all foreign remittances above ₹ 7 lakh except for education and medical bills.
- The rich seek to live in other countries for non- monetary reasons too—such as children’s education, social security and a better lifestyle.
WHERE THEY ARE MOVING TO ?
- The US, Canada and Australia continue to be the top destinations not just for the rich but for Indians from lower income brackets as well.
- Higher education and career prospects in these countries drive the demand.
- Tech entrepreneurs and wealthy Indian families also set up their businesses and offices in Dubai and Singapore to access a larger market and robust banking solutions.
IMPACT OF HNWIs LEAVING INDIA :
- The constant flow of rich Indians moving to another country or taking up residency in another country can be a concern for India as it plans to reach the $5 trillion economy.
- It can be a sign of bad things to come as high-net-worth individuals are often the first people to leave – they have the means to leave unlike middle-class citizens.
- India also loses on the tax collection front when the rich leave.
EASIER FOR RICHES TO EMIGRATE :
- Countries offer an easier visa route for those willing to make an investment or set up a businesses.
- The US EB-5 immigrant investor programme, for instance, offers a far smaller queue than other routes to get a green card for a minimum investment of $800,000.
- The UAE’s Golden Visa grants renewable residence for up to 10 years with a minimum investment of $550,000.
- Indian millionaires sometimes move to exotic locations or tax havens such as Portugal, Greece and Monaco, albeit in a smaller number.
WAY FORWARD- SHOULD INDIA ALLOW DOUBLE CITIZENSHIP ?
- Investment migration is certainly a drain, but also a reality.
- This loss is somewhat offset by remittances, growing connections of trade, foreign investments and tech transfers from destination countries.
- While most Indians opting for permanent residence elsewhere do not necessarily surrender their passport or take up new citizenship, many do—after living abroad for many years.
- In such a scenario, a dual citizenship would have allowed them to hold on to their Indian passport, as many would like to do.
SYLLABUS: MAINS, GS-1,INDIAN SOCIETY