India has more than 330,000 individuals with assets of $1 million or more and is adding thousands more to this tally every year. Yet, India is facing a ‘wealth drain’ situation due to a steady increase in the number of HNIs leaving the country for golden visa destinations like Cyprus, Malta, the US, and Portugal.
A 2018 survey found that around 23,000 dollar millionaires left India between 2014 and 2018. This is confirmed by the nine-fold jump – from $5.5 million to $45 billion – in outward remittances during the same period.
A 2020 World Wealth Report indicated that India added around 7,000 new HNIs between 2019 and 2020. Yet, a Global Wealth Migration Review for 2020 showed that around 7,000 HNIs left India for foreign destinations.
This is a worrying situation where India succeeds in creating new millionaires but struggles to retain them and their wealth in the country.
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Why is Investment Immigration so Popular in India?
The specific reason why a HNI opts for investment immigration may vary. However, the underlying logic is always the same – hedge against risk.
Wealth destruction is the biggest risk that wealthy individuals face, and this may take place due to many reasons ranging from war or an unfriendly government to absurd government policies.
Investment immigration is popular among Indians because it is a very effective hedge against volatility, devaluation of assets, and political risk. Demand for golden visas surge after every crisis. The 2008 recession led to a spurt in demand for these programs.
Now, the COVID-19 pandemic is acting as a catalyst to increase demand, especially in emerging economies like India.
Investment Immigration – India vs Indian
One aspect unique to India is the vast population of Indians living abroad as expats. Countries like the US, the UK, and the UAE have a significant population of Indian professionals and entrepreneurs on short-term work visas.
The surge in Indian demand for the US EB-5 has come primarily from Indian professionals on H-1B visas and pending EB-1/EB-2/EB-3 green card applications in the US.
This is evident from the fact that significant Indian EB-5 investors choose Adjustment of Status as opposed to Consular Processing after getting the US green card. The former is available only to those already in the US while the latter is open only to those outside the US.
Attracting wealthy Indian expats has been an important factor contributing to the UAE’s decision to relax its notoriously restrictive immigration and citizenship rules. The UAE now offers permanent residence to property investors through its own golden visa program.
Further, eligible professionals, investors, and entrepreneurs can even qualify for the UAE passport, although lack of dual citizenship is a deterrent of Indians not wishing to completely terminate the bond with their motherland.
COVID-19 Pandemic – Accelerating the Trend
The pandemic has led to a surge in investment immigration inquiries among the wealthy across the world. There was a 235 percent jump in interest from American citizens. Canada and the UK lagged behind the US but still contributed with a jump of 74 percent and 38 percent respectively in inquiries.
What complicates the matter is that, unlike other developed countries, there is no interest among the global elite to invest and settle in India. This means every millionaire who chooses to settle abroad represents a permanent opportunity lost for the Indian economy.