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NRIs – Building Blocks In India’s Growth Story

November 8th, 2019

NRIs – Building Blocks In India’s Growth Story

As per the Income Tax Act of 1961, an Indian citizen who decides to move to a foreign country for employment can be called a non-resident Indian (NRI) if they are not physically present in the country for more than 182 days in a financial year. According to a report released by the Ministry of External Affairs, India’s NRI and POI (Persons of Indian Origin) population reached 30,995,729 in 2018.

Today, Indians make up 6.4% of the world’s total expat population.

The NRI contribution to the Indian economy has been significant. Last year, the World Bank estimated India’s remittances to be the highest in the world, standing at USD 79 bn, followed by China and Mexico at USD 67 bn and USD 36 bn respectively. The country’s remittances grew by 14% in 2018, and going by past trends, it is only likely to increase in the coming years.

NRIs have had an important role to play in the development of the country. Every year, thousands of Indians migrate to other countries in search of better prospects for themselves and their loved ones back home. NRI money transfers to India are channelized towards better education, healthcare, investments, savings, and more.

Often NRIs are seen supporting charities and have been instrumental in providing financial assistance in times of natural disasters like the recent floods. Provision of better facilities and access to wealth raises the standard of living of their families and positively impacts the Indian economy.

How do NRIs help the Indian economy?

Although terms like ‘brain drain’ have tried to put NRIs in a bad light, the reality is that it is hard to overlook the NRI contribution to Indian GDP. Non-residents form only about 1% of the total Indian population but are an integral cog in the system. NRI money transfers, also known as remittances, are a major source of foreign currency inflow in the country.

Remittance is the transfer of money by an expatriate to their home country via a legal channel. As per the World Bank, remittance inflows are a measure of the creditworthiness of a nation. High remittances increase the ‘creditability’ of a country, enabling it to borrow more money.

It’s not hard to understand how NRIs help the Indian economy. NRI contributions to the Indian GDP stood at 3.4% in 2018. Each NRI money transfer adds to the country’s foreign exchange pool. Although India does not rely solely on remittance, the NRI contribution to Indian economy still constitutes a major part of the country’s overall economic development.

Foreign remittances increase the purchasing power of people back home, which in turn stimulates the market and increases demand and supply. The difference in the value of currencies also acts in favour of NRIs, making it easier for them to send substantial funds back home.

Can NRIs transfer money to resident Indians?

NRIs who wish to send money to India to support their children’s education, fund a wedding, help a loved one, engage in divestments or investments, or even buy assets like real estate, can open any of these two accounts: Non-Resident External Rupee account (NRE) and Non-Resident Ordinary account (NRO).

Both of these can be used as a savings or current account. They can also be used for investments like fixed and recurring deposits. NRI money transfers to India are converted to the Indian rupee (INR) as per the prevailing exchange rates.

Are there any differences between an NRE and an NRO account?

While both offer similar benefits, there are some differences in how they function:

1. The main difference between the two is that an NRE account can be opened only with foreign currency, but an NRO account can be opened with both Indian and foreign currencies.

2. An NRE account is tax-free, but an NRO account requires the account holder to pay tax on the repatriated funds.

3. An NRO account can be jointly held by NRIs and Indian residents; whereas, only NRIs can jointly hold an NRE account.

Both NRE and NRO accounts ease the process of NRI money transfers to India with unlimited transactions. In fact, the interest earned from these accounts can be sent back to the account holder, to their country of residence.

An NRE account can be more beneficial for NRI money transfers since it is completely free from Indian taxes. Remitters pay tax only in the country they work and reside in; they are entirely exempt from income, gift, and wealth tax in India.

How can an NRI open a bank account?

NRI contribution to the Indian economy has been a driving force for the country, and NRE and NRO accounts serve as an easy way for remitters to manage NRI money transfers to India. Most registered banks offer to open NRE/NRO accounts upon submission of valid documents, such as your passport, work visa, overseas utility bills, etc.

Once you are an NRE or NRO account holder you can directly remit funds from your foreign bank account. If you are visiting India, you can also make physical deposits of foreign currencies in a local bank here.

Also Read: What Is The Best Method To Send Money To India


For emerging economies like India, international remittances constitute a major source of their gross income and the Indian government has taken steps to encourage NRI money transfers. Favourable exchange rates along with competitive transfer fees offered by money transfer companies like Xpress Money, have played a pivotal part in India becoming the top remittance receiving country in the world.

But there’s still a long way to go. NRI contribution to the Indian GDP might be significant, but newer initiatives by the government are needed to attract more NRIs to invest in the country. For now, we can all agree that in light of the increase in the country’s foreign remittance over the past few years, the future definitely looks positive.