The movement of high net-worth individuals (HNWIs) from one country to another has gained significant attention in recent years. According to a report by advisory firm Henley and Partners, India is projected to witness the departure of approximately 6,500 HNWIs, with a net worth of $1 million or more, in 2023. We will explore the reasons behind this outflow of HNWIs from India and its implications for the country.
Understanding High Net-Worth Individuals (HNWIs):
Before delving into the causes of their departure, it is important to understand who HNWIs are and how they are classified:
- High-net-worth individuals (HNWIs): Investors possessing liquid assets valued between Rs 5 lakh and Rs 5 crore.
- Very-high-net-worth individuals (VHNWIs): Investors with liquid assets valued between Rs 5 crore and Rs 25 crore.
- Ultra-high-net-worth individuals (UHNWIs): Investors who possess more than Rs 25 crore in liquid assets.
Outflow of HNWIs from India:
India is anticipated to be the second-largest contributor to the global outflow of millionaires in 2023, trailing behind China. In 2022, India lost 7,500 HNWIs, ranking third after China and Russia, which was impacted by ongoing conflicts. From 2013 to 2022, a total of 48,500 HNWIs left India. However, it is important to note that despite these outflows, India continues to produce a significant number of new millionaires each year.
Reasons for HNWIs leaving India:
Several factors contribute to the exodus of HNWIs from India:
- Tax legislation: The complex and convoluted rules related to outbound remittances and prohibitive tax legislation have become a major concern for HNWIs. The recent increase in tax collected at source from 5% to 20% on foreign remittances above Rs 7 lakh, excluding education and medical bills, has further exacerbated the issue.
- Better quality of life: HNWIs seek to live in other countries not only for monetary reasons but also due to non-monetary factors such as children’s education, social security, and an improved lifestyle. Countries like the United States, Canada, and Australia, known for their high standards of living, attract HNWIs and even individuals from lower income brackets for better education and career prospects.
- Access to larger markets: Tech entrepreneurs and wealthy Indian families often establish businesses and offices in Dubai and Singapore to tap into larger markets and take advantage of robust banking solutions. These countries offer favorable conditions and easier emigration policies for those willing to invest or set up businesses.
- Easy emigration opportunities: Various countries provide simpler visa routes for individuals seeking to invest or establish businesses. For example, the US EB-5 immigrant investor program offers a faster process for obtaining a green card with a minimum investment of $800,000. Similarly, the UAE’s Golden Visa provides renewable residence for up to 10 years with a minimum investment of $550,000. Some Indian millionaires also choose to relocate to tax havens or exotic locations like Portugal, Greece, and Monaco, although in smaller numbers.
Important Points:
- India is expected to lose 6,500 high net-worth individuals (HNWIs), worth $1 million or more, in 2023.
- HNWIs are categorized based on their net worth, including high-net-worth individuals (HNWIs), very-high-net-worth individuals (VHNWIs), and ultra-high-net-worth individuals (UHNWIs).
- China is the largest contributor to the global outflow of millionaires, with India being the second-largest.
- Reasons for HNWIs leaving India include prohibitive tax legislation, complex rules regarding outbound remittances, and the recent increase in tax collected at source on foreign remittances.
- Better quality of life, including access to children’s education, social security, and improved lifestyle, is a significant factor driving the migration of HNWIs.
- HNWIs seek better education and career prospects in countries like the United States, Canada, and Australia.
- Dubai and Singapore attract tech entrepreneurs and wealthy Indian families due to larger market opportunities and robust banking solutions.
- Countries offering easier emigration options, such as the US EB-5 immigrant investor program and the UAE’s Golden Visa, are appealing to HNWIs.
- Brain drain and loss of talent, knowledge, and investment opportunities are potential implications of the outflow of HNWIs from India.
- Reduced tax revenues can be a consequence of HNWIs leaving the country.
- India needs to address tax legislation and create an environment that retains HNWIs, encouraging them to invest and contribute to the country’s growth.
Why In News
Henley and Partners, a renowned advisory firm on investment-linked visas, has forecasted a significant exodus of high net-worth individuals (HNWIs) from India in 2023, with an estimated loss of 6,500 individuals possessing wealth surpassing $1 million. This anticipated departure of affluent individuals may have wide-ranging implications for India’s economic landscape and investment climate.
MCQs about High Net-Worth Individuals from India
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What is the primary reason for the outflow of high net-worth individuals (HNWIs) from India?
A. Political instability
B. Tax legislation and complex rules
C. Lack of business opportunities
D. Cultural preferences
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Which country is expected to witness the second-largest outflow of millionaires in 2023, following China?
A. United States
B. India
C. Russia
D. Canada
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What attracts high net-worth individuals (HNWIs) to countries like Dubai and Singapore?
A. Favorable tax regulations
B. Access to larger markets
C. Better healthcare systems
D. Cultural diversity
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What are the potential implications of the outflow of HNWIs from India?
A. Increased tax revenues
B. Enhanced economic growth
C. Brain drain and loss of talent
D. Improved business opportunities
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