The Migration of Millionaires | Why Wealthy Indians Are Leaving and What are Its Impact in Indian Economy

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The Migration of Millionaires | Why Wealthy Indians Are Leaving and What are Its Impact in Indian Economy 

Introduction:

As the full budget presentation for 2024 approaches, speculations regarding tax rates are rife. Many anticipate the government will introduce tax cuts for a broad segment of the population. 

There are also reports suggesting potential reductions in income tax rates for individuals earning up to ₹10 lakh annually. 

While these are merely speculations, a distinct group of wealthy individuals has its own plans: leaving the country permanently.

A Trend of Millionaire Migration:

A noticeable trend has emerged with millionaires in India choosing to relocate abroad. Defined as individuals possessing liquid wealth of $1 million (₹8.34 crore) or more, these wealthy people are not simply going on extended vacations but are moving to other countries permanently. 

According to the Henley Private Wealth Migration Report, approximately 4,300 millionaire Indians are expected to leave the country in 2024. 

This trend is not unique to India, as countries like China and the UK are also experiencing high rates of millionaire migration this year. 

Interestingly, the number of Indian millionaires moving abroad is decreasing. From 5,100 in 2023 to 4,300 in 2024, and a significant drop from 7,500 in 2021, the decline is notable. However, the exodus of these wealthy individuals still raises several concerns.

Impact on India's Economy:

The departure of millionaires has several negative consequences for India. 

1. Loss of Tax Revenue: Millionaires are substantial contributors to the tax system. With less than 3% of the Indian population paying income tax, the migration of these high earners results in a significant loss of tax revenue, which impacts government funds.

2. Decrease in Business and Job Opportunities: Many of these millionaires are entrepreneurs. When they move their businesses abroad, it translates to a loss of potential jobs and business revenue for India.

3. Reduction in Forex and Stock Market Investments: Millionaires moving their wealth out of India affects the country’s forex reserves and GDP contribution. Additionally, as major players in the stock market, their departure results in reduced capital investments.

Why Are They Leaving?:

The primary reason behind this migration is the high tax rates in India. For instance, an individual earning around ₹1 crore annually has to pay nearly 30% in taxes. 

In contrast, countries like Dubai offer tax-free income, making them attractive destinations. Besides lower taxes, wealthy individuals seek better safety, security, business opportunities, and an overall higher standard of living, including superior education and healthcare systems.

Preferred Destinations for Millionaires:

In 2024, around 128,000 high-net-worth individuals are expected to relocate globally. The UAE and the USA are the top destinations, followed by Singapore, Canada, and Australia. 

The UAE, in particular, attracts millionaires with its business-friendly environment, luxurious lifestyle, and tax incentives, such as ‘golden visas’. This appeal has also driven many Indian startups to relocate to Dubai or Singapore.

Positive Aspects of Millionaire Migration:

Despite the downsides, there are silver linings to millionaire migration. Many of these individuals continue to support the Indian economy through remittances. 

India received $111.2 billion in remittances in 2022, the highest in the world. These remittances contribute significantly to India’s foreign exchange reserves. Additionally, India still ranks high globally with 326,400 millionaires and 120 billionaires, showcasing its economic growth potential.

Conclusion:

The migration of millionaires from India is driven primarily by high tax rates and the search for better opportunities abroad. 

While this trend poses economic challenges, such as loss of tax revenue and reduced investments, it also brings benefits through remittances and continued economic growth within the country. 

As the global landscape evolves, so will the patterns of wealth migration, highlighting the need for balanced policies to retain and attract high-net-worth individuals.

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