Why Should NRIs Invest In India?

Why should NRI make an investment in India’s Growth Story?

Over the last decade, India has emerged as one of the fastest-growing economies in the world. Its industries are expanding, the economy is stable, and growth prospects remain strong. India is expected to become the third largest economy by 2028¹. The annual economic growth rate is projected at around 6.7% in the first quarter of fiscal year 2026².

 

Key highlights of India’s growth include:

1. India ranks 39th in the Global Competitiveness Index 2024³.
2. It has climbed to the 40th spot in the Global Innovation Index, moving up 41 places in the last 8 years⁴.
3. Over the next 5 years, India is expected to play a greater economic role in the Asia-Pacific region⁵.
4. Global maritime trade is shifting towards the Indian Ocean, positioning India as major manufacturing hub by 2030⁶.

These factors highlight India’s resilience and steady progress, especially post-pandemic. Together, they create strong investment opportunities for NRI in India, making it an attractive choice for wealth creation and long-term growth. With rising innovation, infrastructure development, and government-led reforms, NRIs can benefit from a wide range of financial products and sectors aligned to global standards.

 

Why do NRIs invest in India?

 

Portfolio diversification

By investing in India, NRIs can diversify their portfolio across geographies. This lets them benefit from the growth of the Indian economy. Moreover, with portfolio diversification, NRIs can enhance the return potential of their investments and also spread out the investment risks across different investment avenues and geographies.

 

Good return potential

The investment avenues available in India have a good return potential. Perhaps this is why, in 23 years from April 2020 to September 2023, the Foreign Direct Investment (FDI) in India amounted to $953.143 billion². Thus, NRIs may get good returns on their investments and grow their wealth.

 

Meeting financial goals

The investment avenues available in India can help NRIs plan for their financial goals. For instance, if an NRI is planning to settle in India after retirement, he can invest in a suitable investment option to create a retirement plan. Life insurance pension plans may be a good choice. The deferred pension plans help NRIs save for their retirement and promise guaranteed* lifelong pensions after maturity.

Similarly, a term insurance plan may help in replacing their income in the case of their untimely demise while a child-based insurance plan secures their children’s future.

 

Tax benefits

Lastly, NRIs can claim tax benefits by investing in eligible investment options available in India. The income that NRIs earn in India is taxed in their hands. By using tax-saving investment avenues NRIs can reduce their tax liability. For instance, if they buy a life insurance policy in India, the premium paid for the same is allowed as a deduction under old tax regime, as per Section 80C of the Income Tax Act, 1961 up to ₹1.5 lakhs subject to specified terms and conditions.

Moreover, life insurance benefits also save tax as you can claim exemption on them if the associated conditions are satisfied.

 

Favourable Demographics and Market Demand

India has one of the youngest populations in the world, driving long-term consumption and demand. This makes it a promising market for global investors, including NRIs. Rising disposable incomes, urbanisation, and digital adoption further fuel growth across industries.

 

Key Points:

1. Large youth population ensures sustained demand
2. Expanding middle class with higher spending power
3. Strong digital and e-commerce growth

 

Currency Advantage (INR vs Foreign Currency)

For NRIs, the difference between the Indian Rupee (INR) and stronger foreign currencies creates an attractive investment window. Returns in INR can translate into higher gains when converted back to foreign currency.

 

Key Points:

1. Higher purchasing power for NRIs investing in India
2. The Indian Rupee has gradually depreciated against major global currencies, as noted by the Reserve Bank of India. This makes Indian assets more affordable for NRIs and can enhance returns when converted back to stronger currencies
3. Cost-effective entry into diverse assets

 

Government Reforms Supporting NRI Investments

India’s government has introduced reforms to simplify and encourage NRI investments. From tax incentives to liberalised remittance schemes, policies are designed to make investing smoother and more rewarding for NRIs.

 

Key Points:

1. Liberalised Remittance Scheme (LRS)
2. Tax-friendly policies for NRI investors
3. Relaxed FDI norms across key sectors

 

Alternative Investment Options

Beyond traditional avenues, India offers NRIs a wide range of alternative investments. These options provide diversification and higher return potential, making them attractive for long-term wealth creation.

 

Key Points:

1. Real estate and commercial property investments
2. Startup and private equity opportunities
3. Infrastructure and renewable energy projects

 

How to invest in India?

For NRIs, India offers diverse avenues to grow wealth, but it is important to plan carefully. Understanding how NRI can invest in India starts with assessing personal financial goals, tax implications, and risk appetite. Choosing the right account and investment vehicle makes the process smoother and more rewarding.

 

Key Points to Consider:

1. Set financial goals: Define your objectives, timelines, and required savings before investing.
2. Know tax rules: Different investment avenues have different taxation structures for NRIs.
3. Account type matters: Open an NRE or NRO account to route your investments legally.
4. Manage risk: Equity funds or ULIP plans suit investors who want market-linked returns, while endowment plans work for individuals looking for stable growth.
5. Currency risk: Factor in exchange rate fluctuations that impact returns.
6. Go digital: Most investment platforms allow NRIs to invest online from anywhere in the world.

 

Summing it up

India is a developing economy that has shown strength even when the world is in turmoil. As an NRI you can invest in India’s growth story and benefit from the economic development that is expected to occur in the future. The government is also easing the investment process for NRIs allowing you to invest without hassles. So, assess your needs and then invest in suitable avenues for portfolio diversification and unlock India’s growth potential.

 

FAQs

 

1. Are NRIs allowed to invest in ULIPs in India?

Yes. NRIs can purchase ULIP (Unit Linked Insurance Plans) in India, subject to fulfilling the eligibility conditions. The tax deductions under Section 80C on premiums paid and tax-exemption under Section 10(10D) on the maturity benefit are available for NRIs..

 

2. Do NRIs get tax benefits on investments in India?

Yes. NRIs enjoy tax benefits including deductions under Section 80C (for investments like ULIP premiums, ELSS etc.), tax-free interest on NRE fixed deposits, and certain exemptions under insurance plans bought from a company registered in the IFSC/GIFT City area. For instance, proposals that allow tax exemption under Section 10(10D) for policies bought from IFSC offices.

 

3. Can NRIs invest in real estate in India?

Yes, NRIs can invest in residential and commercial properties in India. However, they are not allowed to purchase agricultural land, plantation property, or farmhouses unless these are inherited or received as a gift.⁸

 

4. How do NRE and NRO accounts help in investing?

NRE and NRO accounts facilitate how NRIs channel funds into Indian investments. NRE accounts allow foreign currency remittances, full repatriation of both principal & interest, and interest is tax-free. NRO accounts handle income generated in India⁷, but interest is taxable and repatriation of funds has limits. Pick the right one depending on source of funds and investment goal.

 

Source :

1. https://economictimes.indiatimes.com/news/economy/indicators/india-to-be-3rd-largest-economy-by-2028-morgan-stanley/articleshow/118983662.cms?from=mdr
2. https://economictimes.indiatimes.com/news/economy/indicators/gdp-growth-in-q1-projected-at-6-7-on-strong-govt-capex-rural-demand/articleshow/123439352.cms?from=mdr  
3. https://theiashub.com/upsc/indias-ranking-in-different-indexes/
4. https://www.pib.gov.in/PressReleasePage.aspx?PRID=1961576
5. https://www.pib.gov.in/PressNoteDetails.aspx?ModuleId=3&
6. https://www.pib.gov.in/PressReleasePage.aspx?PRID=2182563&
7. https://cleartax.in/s/nre-nro-accounts
8. https://tax2win.in/guide/nri-buy-property-india-tax-implications