India's Record $135 Billion Remittances in FY25, Budget 2026 Focuses on Diaspora Capital
In the fiscal year 2025, India achieved a significant milestone by receiving approximately $135 billion in foreign remittances, which accounts for nearly 3.5% of the country's GDP. This remarkable figure solidifies India's position as the world's largest recipient of remittances, highlighting the crucial role of overseas Indians in supporting the domestic economy. While these financial inflows have traditionally provided essential consumption support to households, the Budget 2026 introduces a strategic shift, aiming to leverage diaspora savings more effectively for productive capital formation.
Expanding Diaspora Participation in Equity Markets
A key initiative in the budget is the enhancement of diaspora involvement in India's equity markets. The government has decided to double the individual investment limit under the Portfolio Investment Scheme, increasing it from 5% to 10%. Additionally, the aggregate cap has been raised to 24%. This move is designed to:
- Broaden the shareholder base by attracting more individual investors from the diaspora.
- Draw in more stable, long-term capital, which is typically less volatile compared to institutional flows.
- Provide a buffer against heightened global economic uncertainties, ensuring more resilient capital inflows.
By encouraging diaspora investment in equities, the budget aims to create a more diversified and robust market environment, fostering sustainable economic growth.
Simplifying Real Estate Transactions for Non-Residents
Beyond equities, the Budget 2026 addresses regulatory hurdles in real estate transactions involving non-resident Indians (NRIs). A significant change is the removal of the mandatory tax deduction and collection account number (TAN) requirement for resident buyers purchasing property from NRIs. Instead, the system shifts to a PAN-based TDS challan process. This simplification:
- Reduces administrative friction that previously deterred transparent asset monetization.
- Makes real estate transactions more accessible and efficient for both residents and NRIs.
- Encourages greater participation in the property market, potentially boosting investment flows.
These measures are part of a broader effort to lower regulatory and tax barriers, making it easier for the diaspora to engage with India's economic sectors.
Institutionalizing Diaspora Participation for Economic Stability
The budget's initiatives signal a clear intent to institutionalize diaspora participation in India's economy. If implemented effectively, these policy changes can complement traditional remittances by:
- Strengthening corporate and household balance sheets through increased investment.
- Funding enterprise creation and supporting overall economic growth.
- Helping stabilize capital flows and the currency in a volatile external environment.
By channeling diaspora savings into productive avenues, India aims to transform these financial flows into a powerful engine for long-term development, moving beyond mere consumption support to foster a more resilient and dynamic economy.
