The Reserve Bank of India has allowed all resident individuals to remit up to $25,000 outside India for any purpose. The overseas investments that have been denied to Indians for a long time now will allow them to use the $25,000 for various purposes like • any current or capital account transactions or a combination of both, • acquiring and holding immovable property or shares or any other asset outside India, and • opening, maintaining and holding foreign currency accounts with a bank outside India.

This facility is in addition to those already available for private travel, gift remittances, studies and donations; you can remit $25,000 per annum over and above the remittances that are permitted under any other exiting guidelines.

What does this new directive from the RBI mean for the retail investor? Is the retail investor likely to benefit from the same? As Ajit Dayal, CIO, Hansberger Global Investor, puts it, “I dare say that over the last thirty years, on a U.S. dollar adjusted basis, probably the rate of return that you earned from investing in the U.S. would be the same as investing in India. So, although the BSE index has gone from 100 in 1980-81 to 5,600, it sounds like it has gone up 56 times. But the Indian rupee has gone from Rs 8 per dollar to Rs 45 per dollar. So you have given up a lot of it because of the currency depreciation.”

Currently, the $25,000 per annum limit does not make investments in immovable property or any other large value transaction feasible (although one can invest in REITs—real estate investment trusts). Therefore, initially, the large part of the $25,000 limit could be channeled for mutual funds and stock markets investments abroad. There are other technical constraints like transfer of funds and access of information.