India is known for having the largest diaspora population in the world. However, what is most important for wealth managers in India is the reverse migration phenomenon that is attracting wealth back to the country.
Many Indian descendants from around the world are moving back to their ancestral home – along with their wealth – in a phenomenon known as reverse diaspora. According to UN data, India has the largest diaspora in the world, with 16 million Indians living outside the country. Most reside in the surrounding Asian region and the Middle East, but a considerably large Indian minority is also present in developed countries such as the US, Canada, and the UK.
India ranks first as the largest remittance-receiving country in the world according to the World Bank. As the Indian diaspora contributes to over 3% of the country’s GDP, the government is committed to encouraging this flow of money.
Although dual citizenship is not an option for Indian migrants, special visa arrangements exist for non-resident Indians (NRIs) and Overseas Citizens of India card holders. Both benefit from visa-free travel to India, and the same civil rights as Indian residents.
In addition, in September 2016 the Indian Prime Minister Narendra Modi introduced an investor visa targeted at those able to invest between INR100m ($1.63m) and INR250m ($4.08m) over a set period of time. Persons of Indian Origin who have amassed their wealth in countries such as the US or the UAE, but who are not Indian passport holders, may nonetheless feel a strong emotional attachment to their ancestral land and be willing to use this vehicle as an entry into the country. Among them, many entrepreneurs consider this as an opportunity to benefit from the dynamism of the local market, the lower costs, and the rapid economic growth, while going back to their roots and rekindling with family.
This is a significant opportunity for wealth managers, and advisors should keep an eye on this growing demographic and tailor specific products accordingly. By targeting expat Indians on their way back to their home country, private banks with international capacity can accompany their clients through moving their assets from one country to another. Moreover, catering to the returning Indian diaspora’s financial needs – such as their children’s education (often outside India) or retirement – is paramount. As highlighted in our Wealth in India: HNW Investors 2017 report, pension planning service demand is forecast to experience the highest growth, as Indian expats coming from overseas will need an alternative retirement income when moving back to India.
NRIs have been a lucrative segment for financial advisors operating outside India, and many providers have set up specific teams to cater for their needs. Today’s reverse migration trend suggests that local wealth managers will be able to benefit from this lucrative client group as well. Those that are able to tailor their propositions accordingly will find that servicing this segment will be paramount to staying ahead of the game in the increasingly competitive Indian wealth management market.
By Silvana Amparbeng, Wealth Management Analyst