The most popular destinations for wealthy Indians are the US, UAE, Canada, Australia, Singapore, and the UK. Clearly, when wealthy people migrate from India, their wealth migrates with them, impacting income generation, wealth creation and employment opportunities.
It is important to understand that HNIs migrate to other countries not only from India but from many parts of the world. In 2023 itself, 13,500 Chinese HNIs left China for other countries, compared to 6,500 from India in the same year. In the same year, 3,200, 3,000, and 1,200 people emigrated from Britain, Russia, and Brazil, respectively.
Also read: Wealthy Indians become secessionists and renounce their citizenship. “Nationalism” The burden of the poor
Not applicable to India
The idea that wealthy people migrate from any country does not apply to India as it is backward and has low potential for development. While India remains the world's fastest-growing economy, progress has stalled in countries where migration occurs. Perhaps this is why more than 30,000 HNWIs emigrated between 2017 and 2022, during which the number of HNWIs in the country tripled.
In fact, the increasing number of HNIs in the country indicates the reality of economic development. Also, the growth in the number of HNIs in the country is not generally due to rising inequality, but rather due to a positive business environment, a vibrant ecosystem for start-ups, and the availability of an abundant skilled workforce. You also need to understand that it is a thing.
Political instability is also often considered as another reason for migration. However, this reasoning does not apply to the migration of wealthy people from India. In the past, this country had long-lasting coalition governments, but those coalitions had inherent political instability. For these reasons, it is understandable that the exodus of wealthy people due to political instability under Dr. Manmohan Singh's United Progressive Alliance (UPA) government, which was characterized by policy paralysis. However, after that, the argument that the government is unstable and politics with a one-party majority is unstable no longer applies.
Another reason for the migration of wealthy people is that India is a country with a large population and inadequate infrastructure compared to developed countries. In addition to this, environmental pollution, smoke, dirt, and chaos make life difficult in this country. In such situations, wealthy people who have the option of going abroad tend to do so.
This reason does not apply to India as the past decade has seen unprecedented progress in all types of infrastructure (roads, metros, railways, water, aviation). Not only this, but special achievements were also achieved in digital infrastructure. Digital payments, DigiLocker, digitization of government services, etc. are developments that even developed countries would envy.
Also read: Why are wealthy Indians fleeing the country and economists not returning?
Startup inversion
India has a large number of newly successful start-ups operating entirely within India, but foreign investors in these start-ups are relocating them to more favorable destinations. I'm thinking of doing it. This is called “inversion.” Currently, our country ranks third in the world in terms of startup ecosystem, with approximately 100,000 startups in our country, of which 111 are unicorns (valued at over $1 billion).
It is worth noting that Indian startups want additional capital investment for business expansion and are receiving this investment from foreign funds. These foreign funds do not want to be bound by Indian regulations and impose conditions on startups in which they invest, forcing them to move overseas.
Indian startups fall into the trap of foreign investors as there is less investment from Indian funds. Indian funds shy away from investing in startups due to unfavorable tax rules and fewer tax benefits than foreign funds. Recently, the reversal trend has reversed, and many of the startups that reversed have returned, and many are in the process of returning. Commerce Minister Piyush Goyal's recent statements indicate the same.
Some believe that the high effective tax rate for such people needs to be rationalized.
Separately, some experts argue that India's high corporate tax rate is also causing wealthy Indians to move abroad. Indian companies whose parent holding companies are located in countries such as Mauritius, Singapore, Dubai, the UK and the US will have to pay corporate tax, but the tax rate will be higher for existing companies in India. In this situation, it has been proposed that immigration could be deterred by imposing lower taxes on all Indian businesses.
It is important to understand that different countries around the world are competing to lower their corporate taxes to the minimum in order to attract investment. While this would not have any particular impact on revenue for a small country, it is not a good policy for a large country like India. Therefore, efforts are being made globally to ensure that all countries agree on a minimum level of corporate tax below which no corporate tax will be levied. Therefore, to prevent the exodus of wealthy people from India, efforts should be made to fix the lower limit of corporate taxes through international cooperation, rather than reducing corporate taxes.
we need to change our way of thinking
There are two types of rich people in India. One group believes in this country and its growth. There are many businessmen and businesspeople in this country who believe in India's potential and have invested large sums of money. Based on investments by the country's private sector, there has been unprecedented development in all sectors, including infrastructure, industry, services and agriculture.
Secondly, some wealthy people have inherited a large amount of wealth and no longer wish to run a business, but instead wish to settle in a foreign destination and live a comfortable life. We need to explain to such people that it is wrong to abandon the country that has given us this wealth for personal comfort. Notably, the Indian government has banned people of Indian descent from withdrawing more than $1 million from domestically earned or inherited money, which is the right move.
Ashwani Mahajan is a professor at PGDAV College, University of Delhi. He tweets @ashwani_mahajan. Views are personal.
(Edited by Prashant)
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