Exodus of High Net Worth Individuals: Over 6500 Wealthy Individuals to Leave India in 2023

 

Exodus of High Net Worth Individuals: Over 6500 Wealthy Individuals to Leave India in 2023

Ira Singh
16 June’23

In a significant development, it has been reported that India is set to witness a mass exodus of high net worth individuals (HNWIs) in the year 2023.

A survey from the Henley Private Wealth Migration Report 2023, which monitors wealth and investment movement patterns globally, predicts that 6,500 high-net-worth people (HNIs) would likely leave India in 2023.

As per the report, the outflow is not especially alarming because India can produce new millionaires. The analysis projects that by 2031, there will be a spectacular 80 per cent rise in the population of high- net-worth individuals, making India one of the world’s wealth markets with the quickest growth rates during this time. Financial services, healthcare, and other sectors will be particularly important drivers of this development.

As the standard of living rises, it has also noticed a trend of wealthy people returning to India, and it expects a significant number of these people to return in increasing numbers.

However,this phenomenon also raises concerns about the impact it may have on the Indian economy and the underlying factors driving this trend.

The departure of HNWIs, individuals with substantial financial assets and net worth, has been attributed to several factors. Economic uncertainty, regulatory challenges, and a desire for better prospects in other countries have emerged as primary reasons for their decision to leave.

Additionally, geopolitical instability, taxation concerns, and a perceived lack of business-friendly policies in India have further fueled this trend.

Investors take about relocating families :
Dominic Volek, the company’s group head for private clients, claimed that the recent and ongoing unrest has resulted in a change where more investors are thinking about relocating their families for a variety of reasons, including safety and security, education and healthcare, climate change resilience, and even crypto-friendliness.

“Nine of the top 10 countries for forecast net HNI inflows in 2023 host formal residence by investment programmes that encourage foreign direct investment in return for the right to reside, which can also lead to citizenship in some cases. Investors see the clear value of diversifying their domicile portfolios as the ultimate hedge against both regional and global volatility, now and in the future,” Volek told in an interview with national daily.

Sunita Singh-Dalal, partner, private wealth and family offices at Hourani claimed, “Prohibitive tax legislation coupled with convoluted, complex rules relating to outbound remittances that are open to misinterpretation and abuse, are but a few issues that have triggered the trend of investment migration from India. Dubai and Singapore remain preferred destinations for wealthy Indian families. The former, also known as the ‘5th City of India’, is particularly attractive for its government-
administered global investor ‘Golden Visa’ programme, favourable tax environment, robust business ecosystem and safe, peaceful environment.”

One of the key driving forces behind this exodus is the uncertainty surrounding the Indian economy. Despite the country’s rapid growth in recent years, a combination of factors, including the COVID-19 pandemic and subsequent economic slowdown, has created an atmosphere of uncertainty for the business community. This uncertainty, coupled with complex regulatory frameworks and bureaucratic hurdles, has led many HNWIs to seek more favorable business environments abroad.

Taxation policies have also played a significant role in prompting wealthy individuals to leave India. The introduction of stringent tax regulations and increased scrutiny of high-income earners has resulted in a higher tax burden for HNWIs. This, combined with concerns over the enforcement and implementation of tax laws, has led many wealthy individuals to explore jurisdictions with more favorable tax regimes.

Geopolitical instability has also emerged as a factor driving the exodus. The evolving global landscape and geopolitical tensions have caused some individuals to seek countries perceived as more politically stable and secure for themselves and their families. This trend has been particularly evident among HNWIs who have international business interests and wish to diversify their holdings across different regions.

The departure of over 6500 HNWIs in a single year is expected to have significant implications for the Indian economy. The loss of such a substantial number of wealthy individuals can result in reduced investments, decreased job opportunities, and a potential brain drain of talented individuals. It may also impact the country’s overall business environment, as the presence of successful entrepreneurs and investors often fosters economic growth and innovation.

To mitigate this trend, Indian policymakers and authorities need to address the concerns raised by HNWIs. This includes simplifying regulatory procedures, ensuring greater ease of doing business, and creating a tax regime that is perceived as fair, transparent, and competitive. By providing a more favorable towards addressing the underlying concerns and creating an ecosystem that encourages wealth creation, job opportunities, and economic growth within India.