Indian families which receive money from their non-resident brethren are no longer stashing it all away in property investments or bank deposits. Instead, they are spending more of it.

According to RBI data, families used less than half of the remittances they received in 2012-13 towards their living expenses — this is the first time this has happened.

While only 3 per cent of the money went into property investments, discretionary spending accounted for 21 per cent of the remittances.

Six years ago, in 2006-07, families used 54 per cent of the funds remitted by NRIs to India to maintain themselves and put away a tenth of the money in property.

This spiked to 61 per cent in 2009-10 in the wake of the global economic crisis; families used up a lion’s share of the money received just to fund their living expenses.

Rupee depreciation Depreciation of the rupee in recent years has probably aided this trend.

Every dollar remitted to India in 2012-13 fetched around Rs 55 against around Rs 44 in 2006-07.

Nevertheless, NRIs’ families in India persist with a strong culture of saving: the proportion of remittances that they deposit in banks remained constant at 20 per cent of the total funds between 2006-07 and 2012-13.

Among the investment avenues, the appetite for equity and other instruments has risen, while that for property investment appears to have diminished. From 10 per cent of total remittances in 2006-07, utilisation of these funds for investment in land and property fell to just 3 per cent in 2012-13.

In what is likely to be a welcome sign for the RBI, remittances were not used in a material way to buy gold. And while this never was reflected in earlier data, 3 per cent of the remittances were used for social or religious functions in 2012-13.

Varies across cities The utilisation pattern of remittances varies across cities in India.

For example, in Chennai, 53 per cent of total remittances is used for family maintenance, whereas in Ahmedabad the proportion is 72 per cent. Investment in equity shares with remitted funds is highest in Bangalore, where 10 per cent of the total remittances is earmarked for this purpose.

And real estate gets highest priority among families of NRIs living in Lucknow, who utilise 6 per cent of the funds they receive to invest in property.

arvind.jayaram@thehindu.co.in

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