NRI Investments in India

N R I INVESTMENTS I N INDIA :
PR08LEMS AND PERSPECTIVES
T h e w Submitted t o Pondtcherry Un~versltv
for
the
Award
of
the
DOCTOR OF PHILOSOPHY
Degree
In
Of
Commerce
BY
R AZHAGAIAH
Guhde and Supervisor
MURUGESAN P ~ D
DEPARTMENT
PONDICMERRY
OF COMMERCE
UNIYERBLTY
PONDICHERRY
- 605
001
Dr. B. m
U
G
E
B
I
I
I
l, M . C a . , Ph.D.,
Reader in Comerce,
Department of Commerce,
Pondicherry University,
Pondicherry - 605 104.
This is to certify that the thesis, "IRK

Investments in India: Problems and Perspectivesn is a
bonafide research work done by Mr. R. AZUM;AIAU during the
period from 07-07-1988 to 06-07-1990 under my supervision.
The subject on which the thesis has been prepared
is his original work and it has not previously formed the
basis for the award, to any candidate, of any Degree,
Diploma, Fellowship or other similar title of any University
or Institution.
Place: Pondicherry
Date : 14- 1 2 - 9 0
(B.
w;gsAN)
Dr. 8. MURUCtSAN
READER IN COMMERCE
POhJlCHFRRY UNIVERSITY
i:
?GI .,x
Counter Signature by the

Professor and Head
INIHRU 5TRFFT
<,!U R ) t , t ~ ,rlw'
R.AZEAGAIAE, Y.Coa.. Y.Phi1..

Research Scholar,
Department of Commerce,
Pondicherry University,
Pondicherry 605 104.
STAT-
BY TBE CANDIDATE
I hereby state that the thesis for the Degree of

Doctor of Philosophy on "NRI Investments in India: Problerm
and Perspectives" is my original work and no part of the
thesis has been submitted for the award of any other Degree,
Diploma, Fellowship or other similar title.
Place: Pondicherry
Date :
/?/u/~D
ACKNOWLEDGEMENTS
LIST OF TABLES
Chapter
INTRODUCTION AND DESIGN Of THE STUDY

EVOLUTION OF NRI INVESTMENT OPPORTUNITIES
AND LIBERALIZATION POLICIES
TREND OF NRI INVESTMENT IN BANK DEPOSITS
TREND OF DIRECT INVESTMENT BY NRIs
TREND OF NRI PORTFOLIO INVESTMENTS
AWARENESS AND AVAILING OF FACILITIES AND
INCENTIVES
VII
VIII
INVESTMENT PATTERN AND IMPACT OF INCENTIVES

SUMMARY OF
BIBLIOGRAPHY
FINDINGS
AND SUGGESTIONS
This academic pursuit drew inspiration from many

sources.
It is my pleasant privilege to place on record my
sincere gratitude to all the persons who inspired and helped

me in this endeavour.
First of all, I thank the Pondicherry University
authorities for having awarded me a fellowship for this
Doctoral Programme.
I am heartily indebted to Dr. 8 . Yurugesan,
Reader, Department of Comperce, Pondicherry University,

Pondicherry, my guide and supervisor, whose discerning eye
has scrutinized the whole of this thesis, and whose useful
suggestions and valuable ideas were of immense help to me in
this venture. I find no words to express my deep sense of
gratitude to him for his excellent supervision, constant
encouragement, and constructive criticism right from the
choice of the research problem, till the submission of the
thesis.
My
deep
sense
of
gratitude
is
due
to
Dr. D. Rajagopalan, Professor and Head, Department of,

Commerce, Pontiicherry University, Pondicherry who has been a
great source of inspiration and guidance, and very generous
in providing me with all the necessary facilities in
carrying out this research.
I shall be failing in my duty if I do not express

my sincere thanks to Shri T.P.
Controller),
Muniappan, (Joint
Shri A. Sreedharan, (Exchange Control
Officer), Shri C. Ethirajan (NRI Cell), and Shri Antony John

(Asst. Exchange Control Officers),
Exchange Control
Department, Reserve Bank of India, Madras for their immense

help rendered in collecting the relevant data and
information for my study.
Mention must be made of the help extended to me by
Shri V. Goaathinayagam, Regional Manager, Indian Overseas
Bank, Regional Office, Pondicherry, for his special care and
co-operation in collecting the significant information and
data.
I also thank Shri K.V.K.
Yurthy, Member of the
Faculty, Reserve Bank Staff College, Madras, who gave

several critical suggestions that prompted fresh thinking in
my research work.
I am highly indebted to Shri
A.
Sathyamoorthy,
Joint Adviser (NRI), and Shri O.P. Ranga, Section Officer,

Indian Investment Centre (IIC), New Delhi, who permitted me
to vislt the IIC library, and provided several more details
and data relating to my research study.
I thank the authorities and staff of the libraries
at Reserve Bank Staff College, Reserve Bank of India, Staff
Co-operative Society, Institute for Financial Management and
Research, Madras, the Indian Investment Centre, and the

Indian Council of Social Science and Research Documentation
Centre, New Delhi, for having permitted me in referring
books and journals, and collecting bibliography for my
study.
I recall with gratitude the kind help extended in

giving information and data to me by the respondents.
Without their co-operation the research study would not have
been completed successfully. I sincerely thank all of them.
Above all, I am deeply indebted to my Parents for
their constant encouragement and affection towards me which
induced and helped me a lot in many ways in completing this
research study successfully.
Finally, I express my thanks to Mr.D.G.Rtumlingnm,

Proprietor, and b . R .
Saravanan, RAMTEC, Pondicherry, for
their kind help and co-operation extended to me in the neat

execution of the typing of my thesis promptly.
( R . AZBAGAIAE)
LEST O F TABLES
LIST OP TABLH3
Title of the Table
Outstanding Balances of NRER Account and

FCNR Account Deposits
Correlation Co-efficient
Rates and NRI Deposits
for
Exchange
Trend of NRI Investment in Bank Deposits

Outstanding Amount of NRER and
Deposits - Currency-wise Analysis
FCNR
Currency-wise Trend of NRI Investment in

FCNR Deposit
Average Exchange Rate for $ and f
Trend of Exchange Rates of $ and f
Comparative Interest Rate Chart:Domestic
Deposits Vs. FCNR and NRER Deposits
Average Interest Rates on NRER
for 1980-89
Deposits
Average Interest Rates on FCNR

for 1980-89
Deposits
Rates and NRI Deposits
Interest
for
Trend of Average Interest Rates on

and FCNR Deposits During 1980-89
NRER
111.13
Co-efficient of Regression for Growth of

NRER and FCNR Deposits as an Explanatory
Variable, and Vice Versa, for the Study
Period 1980-89
111.14
Cost of Yield on NRI Deposits in India
mP
no.
113
IV. 1
Direct Investment by NRIs
IV. 2
Scheme-wise
Investments
IV. 3
NRI
Investments
in Top
Five
Industrial Sector$ During 1983-1989
IV. 4
IV. 5
IV. 6
Industry-wise
1984-1989
Trend
of
NRI
Direct
115
NRI
Investments
Industry-wise Trend of NRI

During 1984-1989
Key
118
During
120
Investments
122
State-wise
Status of
NRI
Approved During 1984-1989
Projects
IV. 7
State-wise Trend of Approved

for NRIs During 1984-1989
Projects
IV. 8
State-wlse NRI Investment in

During 1984-March 1989
125
127
Industries
129
IV. 9
State-wise Trend of Approved Projects

for NRI Investment in Industries Durlng
1984-1989
IV.10
Region-wise NRI Investment in Industries

During 1984-March 1989
IV.ll
Region-wise Trend of NHI Investment

Industries During 1984-1989
in
V. 1
Portfolio Investment by NRIs (Actual

Purchase of Shares and Debentures)
V. 2
Trend of NRI Investment in

Debentures
V. 3
Capital Issues to NRIs by Indian Joint

Stock Companies
V. 4
Trend and Progress of Capital Issues of

Indian Joint Stock Companies to NRIs
Shares
and
Title of tbe Wle

NRI Investment in Company Deposits
Trend of NRI Investment
Deposits During 1984-89
in
Company
Correlation
Co-efficient
for
NRI
Investment in Company Deposits and
Interest Rates on NRI Bank Deposits and
Exchange Rates on $ and P
V. 8
Scheme-wise NRI Investment in units of

UTI During 1979-88
v.
Trend of Scheme-wise NRI Investment

units of UTI
in
v.10
Source-wise NRI Investment in units

UTI During 1979-88
of
v.ll
Trend of Source-wise NRI Investment

units of UTI
in
VI. 1
Awareness and Availing of

According
to Country of
Religion, Age Group, and
Education
Facilities
Residence,
Level
of
VI. 2
Awareness and Availing of Facilities

According
to Occupation, Level
of
Income, Duration of Stay Abroad, and
Reasons for Leaving India
VI. 3
Awareness and Availing of Incentives and

Concessions According to Country
of
Residence, Religion, Age Croup, and
Level of Education
VI. 4
Awareness and Availing of Incentives and

Concessions According to Occupation,
Level of Income, Duration
of
Stay
Abroad, and Reasons for Leaving India
VI. 5
Chi-square Distribution for Awareness

and Availing of Incentives according to
Education
Title of the h b l e
VI. 6
Chi-square distributiol~ for Awareness

and Availing of Incentives According
to Occupation
VI. 7

and Availing of Incentives According to
Income
VI. 8

and Availing of Incentives According to
Country of Residence
VII. 1
Investment
Pattern in
Bank
Account
Deposits According
to Country
of
Residence, Religion, Age Group, Level of
Education and Occupation
VII. 2
Investment
Pattern in Bank
Deposits
According to Level of Income, Type and
Size of the Family
VII. 3
Investment Pattern in Direct Investment

Schemes According
to
Country
of
Residence, Religion, Age Group
and
Occupation.
VII. 4
Investment pattern in Direct Investment

Schemes According to Level of Income,
Type and Size of the Family
VII. 5
Investment
Pattern
in
Portfolio
Investment Schemes According to Country
of Residence, Religion, Age Group, Level
of Education and Occupation
VII. 6
Chi-square Distribution for Preference

of Investments in Bank Deposits and
Portfolio
Investments According
to
VII. 7

of Investments in Bank Deposits and
Portfolio
Investments According
to
Religion
Table
m.
l'ltle of the Table
VII. 8
Investment
Pattern
in
Portfolio
Investment Schemes According to Level of
Income, Type and Size of the Family
VII. 9

of Investments Accoraing to Country of
Residence
VII .lo

of Investments According to Occupation
VII.11

of Investment According to Income
VII.12
Impact of Incentives on Investment in

Bank Deposits According to Country of
Residence, Religion, Age Group, Level of
Education and Occupation
Impact of Incentives on Investment in
Bank Deposits According to Level of
Income, Type 5 Size of the Family,
Reasons for Leaving India, and Duration
of Stay Abroad
Chi-square Distribution for Availing of
Incentives on Bank Deposits According to
Age
Education
Occupation
Income
Incentrves on Bank Deposits According to
Country of Residence.
Abbreviations Used
AER
: Average Exchange Rate
AIR
: Average Interest Rate
CGP
: Children's Gift Plan
CoR
Certificate of Registration
CRR
Cash Reserve Ratio
ECM
Exct~angeControl Mnnual
ESCAP
: Economic and Social Commission for Asia and
the Pacific
EXIM Policy
: Export and Import Policy
FC
: Foreign Collaboration
FCNR
: Foreign Currency Non-Resident Account
FD
: Fixed Deposit
FERA
: foreign Exchange Regulation Act
GO I
: Government of India
GTA
: Gift Tax Act
HPR
: Holding Period Return
I IC
: Indian Investment Centre
IL
: Industrial Licence
ITA
: Income Tax Act
LIBOR
: London Inter-Bank Offer Rate
LO I
: Letter of Intent
NISIET
: National Institute of Small Industry
Extension Training
NRER
: Non-Resident External Rupee Account
NRO
: Non-Resident Ordinary Account
NRIS
: Non-Resident Indians
NSCs
: National Saving Certificates
NSS
: National Saving Scheme
OCBs
: Overseas Corpobate Bodies
OPIC
: Overseas Private Investment Corporation
RBI
: Reserve Bank of India
RD
: Recurring Deposit
RIFE
: Returning Indian Foreign Exchange
RIICO
: Rajasthan State Industrial Development and
Entitlement Scheme
Investment Corporation
SAC
: Special Approval Committee
SIA
: Secretariat of Industrial Approvals
SLR
: Statutory Liquidity Ratio
UTI
: Unit Trust of India
WHO
: World Health Organisation
WTA
: Wealth Tax Act
INTRODUCTION AND DESIGN OF TEE STUDY
Introduction
About 1500 years ago, the Tamil Poet Avvaiyar said
to the young men of her generation: "Go across many seas and
seek the wealth of human achievements."
The enduring
maritime, commercial and cultural contacts that Indians of

her generation forged with South East nations have led to a
strong Indian presence there.'
India, while poor in material terms, is rich in
talent, ambition and drive.
This means that Indians have
been able to go to the farthest corners of the globe

carrying with them no capital, but relying solely upon their
intrinsic
abilities, their willingness to work and deter2
mination to succeed.
1. Jerry Rao, Indians Abroad
Coming of age, Business India

(The Magazine of the Corporate World), Bombay, 2-15 May,
1988, p.90.
2. Gopaldoss. B i Facilities and Incentives for Non-resident

Indians, Chartered Accountant, Vol.XXXVI1, No.3,
September, 1988, p.42.
In almost every country of the world there is a

sizeable population of Indians.
Many had migrated
generations ago and settled down there as nationals of the

country of their adoption.
In more recent years, there has
been a revival of migration3.
Some have taken up short-term
assignments, while others have taken up long-term residence

abroad. Although many of them have become citizens of other
countries, their social, cultural, and emotional ties with
India and Indians have continued to be strong.
As a result
of their hard work and initiative, they have accumulated

large resources of investible funds.4
It is an indisputable fact that India needs a
substantial inflow of capital resources from abroad.
This
is mainly to supplement domestic savings, and also to

finance the deficit in the balance of payments and trade.'
To tide over the difficult balance of payments
situation, and to bring about a turn-round in the balance of
payments, the Government of India (GOI) have initiated a
number of measures to generate additional resources through
3. Agrawal. A.N, Varma. H . 0 , Gupta. R.C, "India" Economic

Yearbo~k,1988-89, National Publishers House,
-Information
New Delhi, p.47.
4. Gopalakrishnan. P.S, L a % - R e g a r d i n g - N o n - r e s i d e n t s in
India, (1985), S.Chand & Co. Ltd., New Delhi, p.5.
5. Kalvan B&ner.ii. Indian Banks Overseas - An Untapped
potential, T'e JouEnal of the Indian ~ n s t i t u t e o f
Bankers, Diamond Jubilee Special Issue, 1928-1988,
V01.59, No.1, January-March, 1988, pp.57-62.
different c h a n n e ~ s . ~~t is a recognised fact that the NonRpsident Indians (NRIs) command sizeable resources in terms
of finance, scientific talent and technical know-how.
Though they are settled in distant lands, their links with
India still continue to help mobilisation of re~ources.~In
a developing economy, like India, investments from NRIs are
indispensable to accelerate the rate of industrialisation
and growth, and they have assumed a great importance in
recent years.
There are about 12 million NRIs spread over 142
countries.
Given attractive facilities and incentives,
estimates of NRI funds seeking investment in India vary from

Rs.10,000 crores to 15,000 crores per
The success of
NRIs in the scientific, economic and cultural fields has

been a matter of great satisfaction to the country.
India
has had a continued association with them, and their

investments have been playing a significant role in the
crucial area of the country's balance of payments.'
Guidelines for Indians Abroad,

(1984). Aruna Publications, New Delhi, p.1.
7 . Kuldeep K. Hajeela, " A Com lete Guide for Non-resident
Indians", Jaico ~ublishTng;use,
Bombay, p.4.
8. Murugesan. B, Investment Incentives and Concessions to

Non-resident Indians, Indian Journal of Commerce
(Quarterly), Vol.XLI1, Part 4, No.157, October-December,
1988, pp. 33-38.
9. Exchange Control Facilities for-Investment by NRIs,
(1889), RBI, Regant Publishers Pvt. Ltd., Bombay, p . 4 6 .
The NRIs have contributed
greatly
to the
industrial promotion and development of the country by

making available foreign exchange, technical skill,
entrepreneurship, knowledge and contacts with international
market, etc.
A large number of them settled in developed
countries like the UK, the USA, West Germany, Canada, etc.,
have at their command immense technical talents; most of
them have migrated after their professional education in
engineering, science or technology in India; they have
worked in those countries for more than two or three decades
specialising in their chosen areas, and benefitting from the
exposure to and knowledge about the most advanced
technologies.lo
The GO1 naturally stressed upon the technological
opportunities in the country to moderuise itself at a fast
pace, and therefore asked the NRIs to use the various
facilities offered for their investments.
Apart from the
technological imperative, NRI investment is welcome for the

capital it would bring into the country.ll
India is
critically short at the margin of financial resources, and

outlays for serval crucial areas in the public sector in the
Seventh Plan are being kept at lower than desirable
lO.Badhwar, W N o n - r e s i d e n t Indians' Complete Reference

Manual, (1986), Law and Business Books, New Delhi, p.18.
11.Venkataraman. P . A , NRI Deposits and Profitability,
Financial Express (Daily), October 4, 1983, p.2,
levels. lZ
A shift from the public to private sector is no
solution to the resources constraints. What is needed is an

increase in resources for additional investment, and this
can come from outside.
Here NRIs can play a very
constructive role.
There are some issues of NRI policy which deserve
special attention.
NRI investment?
First of all, why should India promote
Is it worth the trouble?
As a potential
source of foreign funds, the NRI contribution certainly is

worthwhile.
It might look small today, but given the
incentives, it is possible that India could mop up a fair

amount over a period of time.
When liberalization of NRI investments was
announced in the Budget speech for 1982-83, the amount
invested by NRIs that year in these schemes was Rs.59.63
crores.
It steadily rose to Rs.883.86 crores in 1986-87,
and crossed the Rs. 1,000 crores mark at Rs.1,025.76 crores13

by December, 1987.
However, despite several incentives, the NRI fund
flow has not picked up to the desired level, especially the
investment inflow.
In fact, the composition of funds flow
12.George. C.T, Interest Structure of Deposits in Banking

I, Financial Express, March 28, 1988, p.5.
13.Sb8hil K. Jain, Investment Opportunities, %Investment
Oowrtunities (Fortnightly), 1-15 April, 1989, p.3.
is highly skewed.
Eventhough the total investment made by
NRIs in different schemes has been increasing, the rate of

growth of investments has been declining of late.14
It was
about Rs. 1,970 crores in the initial year of the scheme.

The increase in investment was about 48 per cent in 1985-86
over 1984-85, 43 per ceng5
in 1986-87 over 1985-86.
NRIs may broadly fall under two categories; those

in the Gulf regions and those in other countries.
The
majority of the NRIs in the Gulf regions have gone for

taking up employments which may not last indefinitely, and
havc to return to lndin on thc cxpiry of Ll~cir cmploymcnL
period and visa.
Regardless of incentives offered, these
NRIs would invest in India.
It is for NRIs in other
countries for whom the incentives are relevant. It will not

be administratively possible to formulate different sets of
incentives even if they be not discriminatory. Though NRIs
in other countries may have various social, political, if
not purely
partriotic reasons for making investments in
India, their investment decisions may also be based on

financial reasons.16
14.Rao. K.V, Why Incentives fail to lure NRIs, Financial

Express, January 9, 1989, p.3.
15.Bishwajit Bhattacharyya, Direct Tax Reforms and NRIs,
Financiai Express, October 5 , 1989, p.4 8 12.
16.Piparaiya. R.K, Expatriate Funds: Rhetorics and
Realities-I, Indian Express, February 14, 1983.
On the otherhand, it may be difficult to some of

the NRIs to play a vital role in the development of their
homeland, as they have already decided to settle abroad
permanently.17
But there are quite a number of them who are
uncertain whether they would like to make the foreign

country their permanent home.
Many NRIs have a distant
vision or hope of returning to their homeland someday to

stay permanently.
There are others who plan to return to
India on retiring from service with very comfortable foreign

pension plans la
The GO1 has all along been following liberal
policies for the promotion of NRI investment, offering many
facilities for NRI investment in India.
Realizing the
importance of and the imperative need for NRI funds, India

today provides several more incentives and concessions.
These are also available to overseas corporate bodies
(OCBs), companies, partnership firms, trusts, societies and
other corporate bodies owned to the extent of at least 60
per cent by NRIs or persons of Indian origin.
In 1979, the Ministry of Finance appointed a
working group to study the trends in the flow of inward
17.Krishna Moorthy. R, Investment and Tax Planning for the

NRIs - ( I ) , Fortune India (Monthly), December, 1989,
Vol.111, No.4, p.24 8 25.
18.Dhawan. O.P, Non-resident Indian Investment Facilities,
(1985), 4th Ed., Standard Booksellers, Daribar Kalan,
Delhi.
remittances, and suggest ways and means of facilitating the

deployment in India of the savings of Indians abroadJ9
Of
late, the GO1 has no doubt provided more facilities and

fiscal incentives to NRIs as compared to what were available
in earlier years.
The present study seeks to analyse objectively the
various facilities, incentives and policies in this
direction.
It also aims to study the trend and progress of
NRI investments in various schemes, the general awareness of

the facilities and concessions, and investment patterns of
NRIs, and to offer recommendations to woo
more funds from
NRIs through various channels.
Statement of the Problem

In the context of the search for
resources for
public as well as private sector investment, and in view of

deteriorating foreign exchange situation and mounting trade
deficits, remittances from NRIs constitute an important
source of foreign exchange to supplement the domestic
resources.
NRIs, by their industry and dedication, have
contributed to the prosperity of the countries which they
19.NRI Investment in India: Changes since December 1985,

(1988), IIC Publications, New Delhi.
have chosen as their second homes, while keeping strong

links with the country of their origin.
They have numerous
problems in investing their funds in India.
To mention a
few, they are expected to have basic knowledge of the fiscal

laws of India.
It is better if they are aware of the
various facilities, incentives and concessions that are

being provided by the G O 1 to attract their investment.
Ignorance may generate baseless apprehensions, and in the
case of NRIs, doubts and suspicions caused by lack of
knowledge of the Indian laws would affect their remittances
and investments. 20
Due to lack of sufficient knowledge about the
investment facilities, moSt of the NHIs have no idea as to
what they c.ln do on their return, and therefore, they
accumulate all their savings
abroad and bring the entire
money home at the time of their return.

abroad
Their savings
on an average, range from Rs.3 lakhs to Rs.6 lakhs
over a period of 4 to 6 years.

It is further noticed that several NRIs on their
return exhaust all their savings in a short period (sa.y
within 5 years) and are left with no money as they have no
ready employment.
They spend money on marriages, land,
construction of houses, etc.
Since the government agency
20.Iuvesting in India: A Guide to Entrepreneurs, (1988), IIC

Publications, New Delhi, 11.17.
does not render effective assistance, their plans do not

materialize as they desire."
Although several facilities, tax-incentives,
concessions, and liberalisation in' the procedures are
available, there are still some cumbersome procedures, rules
and regulations for all investments including bank
deposit^.'^
As this information is voluminous, varied, and
is not very often readily available, NRIs find themselves in

an unhappy situation.
As a result NRIs may not gain from
the special benefits and facilities which they could have

availed themselves of had they known about them; they may
even face the embarrassment of the contravention of rules
and regulations.
Recently, the GO1 has introduced a host of
innovative schemes in order to attract the NRI investments
in India.
In spite of the efforts taken, it has not
achieved much, as it was expected in terms of flow of NRI

funds in the form of bank deposits, direct investments, and
portfolio
investment^.^^
Further, some of the NRIs are
2l.Rajendran. S, Taxation of NRIs, The Hindu (Daily), April

5 , 1990, p.9.
22.Radhesyam Purohit, Investment Climate in India is
Positive, Commerce (Weekly), July 25-31, 1987, 78th Year
of Public~tion,p . 3 0 .
23.Sharma. J.V.M, Investment Allowances, Economic
Political W e e k l ~(A Sameksha Trust Publication), October
22, 1988, pp.2235-2238.
reluctant to set up industries in India, and the reasons

attributed to this unfavourable climate may be traced back
to the fact mentioned above. A severe criticism has, on the
other hand, been levelled against the GO1 that the 'undue
and unwarranted' favour shown to NRIs has not borne any
fruits.
Significance of the Study

Indian economy is undergoing a significant
structural change.
There is a definite need to assess how
more and more enterprises in India through NRI funds can be

encouraged, and how the investments can be channelised on a
long-term or permanent basis. 24
In order to facilitate mobilisation of savings of
NRI investment in India, a number of initlatives were taken
during the last decade, in addition to providing several
incentives to NHIs.
Further, a number of concessions are
also available to those who are desirous of setting up

industrial units in India, either independently or in
collaboration with resident Indians.
In the same way, the
GO1 adopts a liberalised policy on the NRI investment in

corporate securities also.
24.Muthuraman. P.R, Implications of NRI Interest Rate at,

Financial Express, September 14, 1985, p.4.
One can expect that such a liberalized investment

climate should reflect a positive response to the NRI
investments in India.
The various incentives and
concessions offered by the GO1 should also have created a

favourable climate to NRIs.
However, it is generally felt that such a large
dose of liberalization measures, procedures, tax-benefits
and concessions has not made the expected significant
mark.25
Instead, there is a slowing down of interest on the
part of NRIs in remitting their hard-earned savings to their

homeland.
Hence it is attempted in this study to find out
the reasons for this state of affairs.
Scope of the Study

The role of NRIs in the industrial and economic
development of the country is gaining importance day-by-day,
and the GO1 is continuously taking serious efforts towards
liberalising the procedures and widening the scope of
investment opportunities.26
An attempt has been made to study as well the
trend and progress of NRI investments in India in various
25.Shabbir. M.S, NRI Investment in Industries

Investment Opportunities, 1-15 May, 1990, p.7.
11,
NRI
26.Sandesh, NRI Investment in Gujarat, India S~zeag

(Fornightly), September 18, 1989, p.18.
fields. The scope of the study is limited to thr
rxistin~
investment schemes of direct and portfolio investment, bank

deposits and other investment opportunities available to
NRIs.
It also discusses the incentives and concessions that
are being made available to NRIs, and the special role of

NRIs in increasing the foreign exchange earnings; it traces
out
the evolution
of NRI
investment
policy, and
amplification of non-residential status under Exchange

Control and Income Tax Regulations.
Further, it is intended to examine how far the
NRIs are aware of the situation to avail themselves of the
opportunities and benefits presently available to them.
An
attempt is also made to analyse the investment pattern of

NRIs, and the impact of the incentives and concessions on
the NRI investments.
Review of Literature
The accumulation of scientific knowledge is a slow
and gradual process, in which an investigator builds on the
works of the past, and his findings serve as a starting
point for the future.
The more links that can be
established between a given study and other studies or a

body of theory, the greater the contribution.
A review of
the existing literature on NRI investment and their status

bears that the GO1 has been endeavouring to popularise this
14
scclur.
It appcurs, Ilowevcr, LhnL
IIU
suet1 sysLcmaLic
research work has been done in this field.

Though there is abundant literature of a general
type on the investment opportunities for NRIs and procedures
in India, few books have been written in this area.
On the
other hand, the GO1 has, from time to time, set up a number
of committees, study teams, and has organised conferences,
and workshops to examine the different aspects and problems
of NIIIs.
Since the subject of the research area is new and
of current interest, no systematic and formal study of the
NRI investments in India has been attempted before.
However, in this field, some experts have attempted to
contribute some inferences relating to NRI investments in
India.
Mohammed ~ a q u e ? ~ from the Economic Forum for
Indian Expatriates, Jeddha, conducted in 1988 a survey to
assess the savings of over ten lakhs NRIs who were working
in the Gulf countries.
According to the study, cash
amounting to Rs.20,000 million was lying idle because the

state and the central Governments have neglected to
channelise those resources into suitable schemes.
Around
half of the amount belongs to the four lakhs NRIs working in

the Saudi Arabia.
27.NRI Funds, NRI Investment Opportunities, February 7,

1990, p . 6 .
The study also reveals that 40 per cent of the

NRIs from Soudi Arabia could invest amounts upto Rs.50,000,
23 per cent upto Rs.25,000, 17 per cent up to Rs.1 lakh, and
just 9.2 per cent above Rs.1 lakh in any investment schemes
in India.
Mr.Baquer also made several suggestions such as
the following to encourage NRI investments in self
employment as well as in major industrial projects: creation
of mutual funds for those returning from West Asia for
investing their savings, granting permission to promote
cooperative rural banks to support schemes promoted by NRIs,
duty-free import of equipments and tools, and preparation of
schemes suitable for skilled and semi-skilled workers.
Incidentally, skilled and semi-skilled workers constitute
about 72 per cent of the 11 lakh NRIs in the Gulf countries.
He has also suggested that 25 per cent of the
seats should be reserved for NRIs who desire to join the
National Institute of Small Industry Extension Training
(NISIET), and the GO1 should offer innovative incentives
such as reduction of customs tariff on a selective basis.
s.c.~o~al~' who conducted a study of the share

structure of 100 major private companies said that their
control can go into the hands of NRIs only with the help of
28.'NRI Investment Sops Pragmatic', Financial Express, May
2, 1983, p . 3 .
the W I , which has a sizeable share holding in each of them.

And also he noted that individual families or business
houses at that time managing various companies were doing so
"by courtesy of the Government."
~ . ~ n b a l a h a n8 ,after
~ ~ making a detailed progress
report on FCNR scheme, in the article entitled "FCNR
deposits, do we need them now?" said that the "FCNR scheme
is prone to misuse by unscrupulous elements abroad". As all
the FCNR deposits would be taken away from the country after
maturity,
"This would mean that FCNH deposits constitute
the real foreign debt of the country to be serviced at a

much higher cost.
We are not as hard-pressed for foreign
exchange resources now ns we were, when we inlroduced the

FCNR scheme. It was time to Reserve Bank of India (RBI) and
the G9I to take a second look at this scheme and scrap it."
The then Maharashtra Chief Minister, Mr.Sharad
~ownr,30 when he concluded a tour of the UK nnd thc US in
1988 to woo the NRIs to set up industries in the state, said
thnt he found nn overwhelming rcsponsc from NIiI inveslors.
He also said that the NRIs felt that there was a good
industrial climate in India, following the sanction of the
29.NRI Investmenr Boost, Financial Express, April 25, 1983,

p.8.
30.Centre, States Keen on Attracting NRI Funds, Indian
Express, ~ u l y19, 1989, p.7.
Pepsico project, and the delicensing of a number of

industries.
A study31 was conducted in cooperation with the
Rajasthan State Industrial Development and Investment

Corporation (RIICO) on NRIs in the State of Rajasthan in
1988.
This would be the case for all the states and the
country as a whole.
The study was based on NRER accounts,
and on a discussion with relatives of NRIs, bankers,

district officials, and the non-resident himself outside
India.
~andesh?Z
in his article (1989), mentioned that
NRIs from the USA have Set up as many as 111 industrial

units in Cujnrat, which accounts for 50 per cent of the
total NRI investment in the state. Those returning from the
UK account for 20 per cent of the NRI investments, and the

remaining 30 per cent investments are by NRls in other
countries.
Indian Investment Centre ( I I C ) ~ ~has also
undertaken some studies on its own or through outside
31.Government to shift focus on NRIs, Indian Express,

September 19, 1990, p.4.
32.Patel. 1.13, NRI Investment Sops: Treat Companies and
Persons Separately, The Economic Times (Daily), August
27, 1989, p.6.
33.Viswanathan. T.C, (The Economic Times Research Bureau),
Non-resident Investment: TV Parts, Video Cassettes
Preferred, The Economic Times, June 17, 1989.
agencies. One such study was to find out the status of the
NRI project, i.e., whether they were implemented, and if
not, the reasons for non-implementation etc.
Letters were
written to NRIs to keep the IIC informed of the status of

their projects.
Assistance of the State Governments was
also obtained in this connection.
A special study34 was undertaken by the IIC on the

status of the approved NRI applications for import of
printing machinery with particular reference to units
proposed to he set up in Delhi.
The staff of the IIC were
asked to make personal visits to the addresses indicated in

the applications.
The study reveals that out of 110
approvals granted, only 11 have been implemented.
38 are
under implementation, and in 58 cases there was no response

or information.
According to the Economic Survey35 of the GO1

(1988), more than 75 per cent of the NHI deposits is of
short-terms-about six months to one year; only a small
portion of these deposits is in the two or three years
maturity slot.
34.Ruchika, NRI's Role in Indian Economy, (World Trade

Centre), The Economic Times, November 17, 1988, pp.2-3.
35.Fresh Incentives to NRIs, The Hindu, June 27, 1990, p.9.
Accordtnp, to a study
conri~~rtcd
nn tllr hnlnnrr or
payments statistics division, RBI, it is found that since

the introduction of the FCNR deposit account scheme in 1979,
remittances worth Rs.284.58 crores came in through 84,471
accounts. The study after reviewing the working of the FCNR
scheme upto the end of 1981, pointed out that nearly 82 per
cent of the deposited amount was in US dollars, and the
remaining in Pound sterling.
Fifty eight per cent of the
Rs.232.25 crores came in through about 6,500 NRI dollar

accounts, and 53 per cent of the Rs.52.33 crores came in
through about 1345 NRI pound sterling account.
Nearly 90
per cent of the pound sterling accounts opened upto the end
of 1981 were for amounts of less than f 3,000 each, and 79
per cent of the dollar accounts were for less than $ 5,000
each.
More than one third of the number of accounts
opened in the first 14 months' of the scheme was of 61
months, duration in respect of both the currencies.
The
study showed that the share of such accounts in the total

deposits was 38 per cent in the case of pound sterling
accounts, and
49 per cent in dollar accounts.
The
reduction in the interest rate and period of deposits in

1978 meant a fall in the proportion of the number of
36.Scrap NRI Investment Scheme: PHD Chamber, Financial

Express, January 6, 1986, p.4.
accounts
and
the corrospondil~g I L ~ ~ U I I L lor

R
lor~g-Lcrn~
deposits.
Removal o f the restriction on the period of
maturity in June 1979 followed by upmrd revisions in the
interest rates did mark a rise in the flow of funds from
NRIs, but even at the end of 1981 the flow was at a slower
pace than the one witnessed during the emergency era.
The recent liberalisation of NRI investment rules
has opened up a vast opportunity for NRI investment in
India.
recent study, "Investing in India" by India
International
Incorporation, n
Wushinton-based
trade
consulting firm, in collaboration with US State Department

and the US Overseas Private Investment Corporation (OPIC),
reported that 34 Indo-US collaborations averaged 20.3 per
cent annual profit after tax during the period 1976-81.
The major contributory factors to this success, as
enumerated in this study, are the availability of cheap
labour and the vast internal market that is offered by
India.
The skilled labour in India has to be paid 37 cents
and unskilled labour 25 cents per hour as against the

average of $1.18 a hour in Singapore, $1.33 in Taiwan, $1.39
in Hong Kong and $1.04 in South Korea.
Also the political stability and the vast pool of
technical manpower attracted, in no small measure, NRI
attention to India for investment.
Operatiom1 Definitions and Concepts

For the purpose of qualify in^ and the availing of
the facilities, tax-benefits and concessions, an NRI is
defined37 as follows:
(i) Definition of NRI according to Foreign Exchange

Regulation Act, 1973 (PER.4)
An NRI is a person satisfying any one of the

following criteria:
a.
An Indian Citizen who stays abroad for employment, or

for carrying business, or
vocation outside India, or
for any other purpose, for an indefinite period.
b.
An Indian citizen who proceeds abroad for higher

studies and takes up a job on completion of his
studies.
c.
A Government servant who is posted abroad on duty with

the Indian Mission and similar agencies set up abroad
by the GOI, and those who have been deputed abroad on
assignments with foreign Government or Regional/
International agencies like WHO, ESCAP, etc.
37.Facilities for Investment kNon-resident Indians (July

' 8 5 ) , IIC publications, New Delhi.
d.
An official of a public sector undertaking or an

autonomous organisation deputed abroad on temporary
assignment, or posted to its branches or offices
abroad.
(ii) Definition of 'Indian Origin'

A person shall be aeemed to be of Indian origin if
a.
b.
He, at any time, held an Indian Passport; or
He or either of his parents or any of his grand parents

was an Indian and a permanent resident of undivided
India at any time.
c.
A wife of a citizen of India, or of a person of Indian
origin shall also be deemed to be of Indian origin even

though she may be of non-Indian origin.
(However,
Pakistani or Bangladesh nationals of Indian origin can

avail of these facilities only after obtaining prior
permission of the RBI).
d,
Indian who permanently reside outside India and acquire

foreign citizenship, or the descendants of an Indian
who migrated out of India, are also considered persons
of Indian origin.
23
(iii) Non-residential Status under Income Tax Act (ITA)

1961
A non-resident is defined under chapter XII-A of

the ITA as "an individual who is either a citizen of India
or a person of Indian origin but who is not resident in
India.''
In other words, a non-resident is a person who is
neither a 'resident' nor a 'resident but not ordinarily

resident.'
b.
"Resident but not ordinarily Resident" in India

A person who is said to be 'not ordinarily
resident' in India if he is basically a 'resident' in the

year of evaluation and
1. his total stay in India in the last seven years
preceding the year of evaluation was less than 730

days, or
2. he was not 'resident' in 9 out of 10 years preceding
the year of evaluation
c.
"Resident and ordinarily Resident" in India
The status of an individual is said to be

"resident and ordinarily resident" in India in a particular
year only
1. if he has been resident in India in 9 out of 10

previous years preceding that year, and
2. during the 7 previous years preceding that year he
has been in India for a total period of 730 days or

more.
(d)
"Residents in India"
Under the ITA, an individual is considered to be a
resident in India if he fulfils any of the following

conditions:
1. if he is in India in the relevant year (Apr.1 to
Mar.31) for a period aggregating 182 days or more.
2 , if he is in India for a period aggregating 60 days
or more in the relevant year, and has been in India

for an aggregate period of 365 days or more in the
preceding 4 years.
In the case of an individual, being a citizen of
India
1. Who leaves India in any relevant year for employment
outside India, the limit of 60 days in clause (2)
above shall be taken as 182 days.
2. Who being outside India, comes on a visit to India

in any relevant year, the limit of 60 days in clause
(2) above shall be taken as 90 days.
Thus, Indian citizens who live abroad are

permitted to stay in India upto 89 days in a year without
acquiring the status of a 'resident'. But such Indians who
are not Indian citizens are permitted to stay only upto 59
days in a year without acquring the status of 'resident'.
However, the recent amendment in the ITA allows
NRIs to stay in India in a year for a period upto 150 days,
on a visit to India, without losing the status of 'nonresident'.
(iv) Amplification of non-residential Status under Exchange

Control and Income Tax Regulations
The said definition 1s rather general and there is
a controversial aspect of FERA and ITA regarding the NRI
status.
A brief discussion on the NRI status under these
two Acts, viz., FERA and ITA is presented below.

The FERA classifies all persons
into two
categories with reference to their residential status: (a)

persons resident in India and (b) persons resident outside
India. But the ITA classifies persons into three categories
with reference to their residential status: (a) resident and
ordinarily resident, (b) resident, but not ordinarily
resident and (c) non-resident.
The term 'Non-Resident Indian' has been defined
for the purpose of chapter XI1 A of ITA containing special
provisions relating to certain income of non-residents.

Accordingly, section 115 C (e) defines NRI to mean an
individual being a citizen of India or a person of Indian
origin who is not a resident.
Explanation to section 115
C(e) .states that a person shall be deemed to be of Indian

origin if he or either of his parents or any of his
grandparents was born in undivided India.
As regards the determination of the residential
status of a person, the provisions of FERA are quite
distinct from those of the ITA. Hesidential status under ITA
depends upon the period of stay in India in the previous
year, and could be ascertained with certainty in every case;
that under FEHA depends on the intention of the person in
regard to stay in or out of India, irrespective of the
period of stay, and thus could vary from time to time
depending upon the circumstances of the case.
The term Non-Resident individuals of Indian
nationality
or
origininon-residents
of
Indian
nationality/origin has been used in the Exchange Control

Manual (ECM) and in circulars issued by the RBI for
eligibility for availing of facilities for investment in
India.
Thus,.it is clear that a person who is a resident
under FERA could be a non-resident under ITA and vice-versa.
A great deal of confusion arises because of the ignorance or
inability of people to understand and appreciate this

distinction.
It would be necessary to refer to the residential
Status of a person under FERA as well as under ITA and also
in the respective NRI schemes in order to ascertain whether
and to what extent the facilities and incentives could be
obtained by an NRI on the facts and circumstances of each
case.
This is so because even within the provisions of the
ITA, in some exemption provisions, it has been stated that

for the purpose of such provisions the residential status
under FERA and not that under ITA would be the basis upon
which the benefits of exemption would be available Section
lO(4) (ii)
Also Foreign born wives of Indian citizens or

persons of Indian origin are deemed to be of Indian origin
for various investment schemes; but they are not considered
NRIs for the purpose of the 'Special Provisions' for NRIs
under ITA
.
For the purpose of investment in different
schemes, reference to NRI would mean NRI nationality, or

origin would also include Indians who have made their
permanent home outside India and acquired
foreign
citizenship, as.well as the descendants of Indians who have

migrated earlier from undivided India and acquired foreign
citizenship.
It should also be understood that unless a person

is resident outside India, he is not allowed to have foreign
exchange assets (except with the permission of the RBI)
whether in the form of Foreign Currency Non-Resident Account
(FCNR) , or Non-Resldent (External) Rupee Account (NRER),
or other assets abroad; thus, the persons availing
themselves of investment facllities in India under the
status of NRI must be
resident ouLside Indin' in Lcrlns of
FERA regardless of whether they are

resident', or
resident and ordinarily
resident but not ordinarily resident', or
non-resident' under ITA.
(iv) Overseas Corporate Bodies

Overseas Corporate ~ o d i e sare
~ ~ predominantly
owned by individuals of Indian nationality or origin
resident outside India.
It also includes overseas
companies, partnership firms, societies and other corporate

bodies which are owned, directly or indirectly to the extent
of atleast 60 per cent of Indian nationality, or origin
resident outside India as also overseas trust of which
atleast 60 per cent of the beneficial interest is
irrevocably held by such persons.
38.NRIs oCBs for Investment in India - Procedures, (June,

&publications,
New Delhi, p.7.
(v)
Foreign Exchange Asset

Foreign exchange asset3'
means any specified asset
acquired, purchased or subsc~i'ledto by the NRIs, in foreign

currency, in accordance with the FERA 1973, and any rules
made thereunder.
(vi) Specified &sets4'

The specified assets are as follows:
a.
Shares in an Indian Company
b.
Debentures issued by Public Limited Companies
c.
Deposits with Indian Public Limited Companies, and
d.
Securities of the Central/State Governments.
(vii) Residelrt Colnpany

A company is said to be 'resident' in India in any
previous year, if
a.
it is an Indian company; or
b.
during previous year, the control and management

of its affairs were situated wholly in India.
39.Nishith M. Desai, Non-residents Investments Incentives

Reference to Tax Heavens
and Tax Planning, -Special
(1986), Taxmann Publications (P) Ltd., Delhi.
40.Pikale. S.V, and Pikale. G.S, Non-residents - Taxation
and Investment in India, Jaic0 Book publishing=
Bombay.
Wearch Questions
The present study is proposed to seek answers to

the following questions.
i) Who is an NRI?
ii) What are the major reasons that influence them to go
abroad?
iii) Where do they live and what do they do abroad?
iv) What are the investment facilities/schemes available
to them in India?
v) What are the incentives and concessions available to
them in India?
vi) How far are they aware of the investment facilities,
incentives and concessions, and to what extcrlt are
their responses toward these schemes successiul'l
vii) What are the important factors that influence them to
ihvest in a pnrticulnr schemc?
viii) What are the major reasons for not having succeeded
in its objectives of some of the schemes?
ix) What is the scope of getting funds from NRIs?
x ) What is the significance of NRI funds in the India's
development?
xi) What are the problems faced by NRIs in investing

funds in India?
xii) What will be the trend of fund flow of investments
from NRIs in the coming years?
Objectives
With the aim of answering the above questions the

objectives have becn frnmed. Thc spccific objrctivcs or thc
study are as follows:
i)
To study thc various investment opportunities,

incentives and concessions available to NRIs, and to
trace the evolution of the NRI Investment policy in
India.
ii) To study the trend and progress of NRI investments in

various fields, such as, Bank Deposits, Direct
Investments, and Portfolio Investments.
iii) To examine how far the NRIs are aware of the various
investment opportunities, incentives and concessions
extended to them and to study their response to such
facilities.
iv)
To analyse the investment pattern, and to study the

impact of the various incentives and concessions on the
NRI investments.
v)
T o suggest various suitable policy measures and

procedural changes needed to make NRI investments more
attractive.
To fulfil the objectives the following hypotheses

have been framed:
HI.
NRIs' awareness and availing of incentives and

concessions depend significantly on their level of
education, occupation, and income.
HZ.
NRIs are aware of and avail themselves of the

incentives and concessions irrespective of their
country of residence.
H3.
NRIs, irrespective of their country of residence and

religion, prefer to invest in bank deposits rather than
in corporate securities.
H4.
NRIs prefer direct investment to portfolio investment

irrespective of their country of residence, occupation,
and level of income.
H5. The availing of incentives on bank deposits vary
significantly with age, education, occupation, level of

income, and country of residence.
Yethodology
The study has been based on a descriptive and
analytical method, and it is a blend of primary and
secondary data.
The secondary data were Collected from the
reports and records of various Government Institutions and

Organisations like the IIC, RBI, Central and State
Government Nodal Agencics for N I < I s , and vnrious Indu6Lrlal
Investment Corporations at the centre and State levels.
To study the general awareness and the availing of

the facilities, incentives and concessions by NRIs, the
required details were collected directly from the NRIs using
an interview schedule. For this purpose a detailed schedule
was prepared covering most of the aspects of the investment
opportunities, facilities, incentives and concessions
presently available to NRIs in India.
The purpose is also
to study the investment pattern of NRIs and measuring the

impact of the incentives and concessions on the NRI
investments.
The interview schedule was administered on the

selected sample respondents after having tested it for
obtaining more realistic first-hand information from NRIs.
Details of information so collected were also analysed using
appropriate statistical tools.
Selection of Sample
The sample design of the study depends to a large

extent on the nature of the problem of investigation.
In
this study the population consists of NRI investors in

corporate securities and NRI depositors in bank accounts.
On the basis of the available information with the
RBI, it is estimated that about 700 NRIs spread all over
Tamil Nadu and the Union Territory (UT) of Pondicherry are
used to visit India every month either on vacation or for
business purposes.
It is learnt, officially, that during
the month of January, 199p, 660 NRIs have visited Tamil Nadu
and the UT of Pondicherry.
sample of 20 per cent.
It was decided to contact a
Accordingly, 132 NRI investors were
selected.
On referring the information with the Madras
Grindlays centre and the Madras stock Exchangc Lhot of the
300 participants of the seminar conducted by them in
January, 1990, about It? per cent each are from the important
towns of Tamil Nadu (Trichy, Madurai and Coimbatore) and the
Union Territory (UT) of Pondicherry-one of the enclaves of
the UT of Pondicherry, and about 28 per cent of them are
from the city of Madras.
On this basis, 132 respondents were contacted
using convenience 'sampling method, by selecting 25
respondents from each centre, and 32 from Madras in order to

give due representation to the various parts of Tamil Nadu
and Pondicherry.
Period of the Study

As it is stated in the methodology, in this study,
both primary and secondary data were collected and, used for
analysis.
The secondary data for the study were considered
for a period of 10 years ranging from 1979-80 to 1988-89.

The data collected were analysed with the help of the
computer also.
Statistical T w l s
The statistical tools used in this study include
percentages, mean scores, standard deviations, co-efficient
of variations, growth rates, linear t.rend, simple and
multiple correlation, simple and multiple regression, chisquare test, etc.
a)
Percentages
For the purpose of bringing out the data for easy
analysis, percentages are computed and taken into account

for drawing implications.
b)
Standard I k v i a l l o n ~
For evaluating the mean values, their variability
and dependability, the standard deviation is extensively

used.
Moreover, to compute the variation .of the mean, the
co-efficient of variation is used.
c)
Growth Rates
Simple linear trend with time as the independent
variable is used to explain the growth rate.
d)
Simple and Multiple Correlation

To study the relationship between two and more
variables, simple and multiple correlations have been used.
e)
Simple and Multiple Regression

Simple and multiple regression between two and
more variables has been used in appropriate cases to

establish the relationship between the variables under
investigation.
In all the cases, It' values and 'R
values
are also computed.
f)
Chi-Squnre Test
In this study, the Chi-square test has been used
extensively for investigating the association between the
different personal variables and investment made by the

NRIS.
Limitations of the Study

Due to constraints on time, it has not been
possible to study in detail the elaborate tax-aspects of
NRIs, as also the procedural aspects for availing the
respective facilities and incentives and for the subsequent
transfer, sale or exchange of such investments in India.
Since no formal study has been made, in this area, regarding
the NRIs, it has not been possible to go through more number
of earlier studies.
As the study is the very first one in this field

of current interest, the researcher has faced a lot of
difficulties and problems in obtaining the required data and
information for completing successfully the study in the
scheduled
time.
Chapter Frame
To present the findings effectively, the thesis

has been divided into eight chapters, giving equal weightage
and importance to each.
In the first chapter an attempt has been made to

introduce the subject of the research study.
It includes
the problems under study,,significance, scope, objectives,

hypotheses, methodology, selection of sample and review of
literature.
The method of data collcction, analysis,
statistical tools used, period and limitations of the study,

operational definitions and concepts used in this study are
also presented in this chapter.
The purpose of the second chapter is to give a
clear picture of the present NRI investment opportunities,
incentives and concessions available to NRIs in India.
It
also aims to review, trace the evolution and overview the

liberalisation policy of the G O 1 on the N R I investments in
India.
The progress of N R I investment in
bnnk
nccount
deposits has been analysed in depth in the third chapter.

This chapter deals with the analysis of NRER and F C N H
deposits in respect of exchange rate variation, interest
rate changes, and the liberalisation policy of the GO1
regarding NRI bank account deposits.
The
fourth
chapter
deals
with
the
NRI
participation in the establishment and growth of industries

in India.
State-wise, region-wise, and industry-wise
contribution of NRI investment in industries has been

analysed in depth.
The NRI share of investment in capital stock

(shares 8 debentures), investment in company deposits and
units of UTI have been analysed in the fifth chapter.
This
chapter also centres around analyses, scheme-wise and

source-wise NRI investment in units of U T I , capital issues
to NRIs in different forms, etc.
The sixth chapter deals with the analysis of the
awareness and the availing of the facilities, incentives and
concessions by NRIs.
In the seventh chapter an attempt has
been made to analyse the,investment pattern and impact of

the tax-benefits and the concessions on the investments.
In the last chapter the summary of the findings of
the study, and suggestions are presented.
EVOLUTION OF NRI INVESTMENT OPPORTUNITIES
AND LIBERALIZATION WLICIES
Introduction
In the first chapter, an attempt has been made ta
introduce the subject of the present research study, state
the problems and bring out the importance of the study.
Objectives, hypotheses, methodology adopted, scope of the
study and review of previous studies have also been stated.
The second chapter is an attempt to trace the evolution of
investment opportunities available to NRIs in India, the
relative benefits available to them, and liberalization
policies of the GO1 on the NRI investments.
For this
purpose, this chapter is divided into two sections:

'Section-A' which deals with the evolution of NRI investment
opportunities, and 'Section-B' in which the liberalization
policies of the GO1 on1 the NRI investments have been
studied.
Evolution of NHI Investment Opportunities

Though the NRI policy could be traced back to the
1960s, the GO1 adopted a liberal policy only in recent years
for promotion of N R I
facilities to them.
investments, and it offers many
These investment channels include bank
deposits, direct investment in industry, portfolio

investments in corporate securities, Government securities,
saving certificates, units of Unit Trust of India (UTI),
etc.
With a view to attracting NH1 investments the GO1
has been providing a number of special facilities and
incentives to NRIs and OCBs.
Substnntinl relaxations were
announced during the past eight years, and the procedures

have been simplified on both repatriation and nonrepatriation basis.
Present Investment Opportunities

NRIs' Deposit in Banks
There are three types of N R I bank accounts in
India as follows:
Non-Resident (External) Rupee Account or NRER Ac-t
NRIs are permitted to maintain NRER account in the
form of savings, current, recurring or fixed deposit account
designated in Indian rupees.
Credits to the NRER account
could be from funds remitted from abroad or from foreign

exchange brought in from 'abroad or out of funds legitimately
due to them in foreign exchange in India. The entire credit
balance including the interest credited thereon can be
repatriated outside India at anytime.
NRER account fixed
deposits of one year and above carry interest of two per

cent higher than the rates on domestic dcposits of similar
maturities.
There are no
restrictions
on
local
disbursements from the account.
Foreign Currcnoy Non-llcsidcnt Account or PKNlt Account

This account can be maintained by NRIs in four
designated foreign currencies, viz., Pound Sterling, US
Dollar, Deutsche Mark, and Japanese Yen.
Amount
in this
account can be held only as term deposit. The entire credit

balance exclusive o f interest earned thereon can be
repatriated outside India at any time.
The interest rates
for various currencies and various maturity periods are

prescribed by the RBI from time to time.
The interest
depends on the currency and the period of deposit.
The
advantage is that the depositor can choose the currency for

deposit.
However, fluctuations in the value of the rupee do
not affect the depositor.
43
Non-Resident Ordinary Accounts (NRO)
These are ordinary rupee accounts which are opened

by NRIs prior to leaving India.
Advantages of these
accounts are: these can be opened jointly with any other

resident in India; local rupee receipts can be credited to
the account and local rupee payments can be made.
funds can not be repatriated abroad.
However,
And the interest
earned on this account is subject to income-tax.
Shares in Indian Companies

Shares provide a very exciting invcsLmc~~Loption
for NRIs.
Normally most of the new issues are heavily
oversubscribed.
For NHIs a separate quota is kept in which
only they compete, and the probability of getting an

allotment is higher.
For them both repatriable and non-repatriable
facilities are available in India.
Shares can be acquired
through direct subscription for new issues or existing

shares from the stock market through stock brokers, and it
can be jointly held by even three persons.
Dividend income
is tax-free upto Rs.7000/- per year.

Investment in shares can be very lucrative or
disastrous depending on the fate of companies in which
investment is made.
With careful selection of companies it
offers goods prospects in the long-run.
Direct Investments
NRIs can invest upto 100 per cent in new issues of

equity/preference shares and/or non-convertible/convertible
debentures of public or private limited companies or
partnership or proprietary concerns except those dealing in
real
estate
business
or
deriving
agricultural/plantation activities.
income
from
This is also
permissible in the case of identified sick industrirs.
Repatriable 40 Per cent Scheme

NRIs can invest upto 40 per cent in new issues of
equitylpreference shares and in convertible debentures of
new or existing Indian companies (other than FERA companies)
raising capital through prospectus.
Such cornpanics should
be engaged in industrial or manufacturing activities or

should be hospitals including diagnostic centres, hotels of
three to five star category, shipping companies, companies
undertaking development of computers, software and
exploration services.
Such investment is allowed upto 40 per cent of the
issue amount.
To facilitate such direct investments, the
issuing companies have to obtain the required permission for

offering the shares to NRIs, and they are not required to
submit separate applications to the RBI.
Repatriable 74 per cent Scheme

NRIs are permitted to invest upto 74 per cent of
equitylpreference shares and convertible debentures for
starting any industry and expansion or.diversification
thereof where the industry is covered by: (a) Appendix I to
the Industrial Licensing Policy 1973, (b) hotels of three to
five star category, (c) hospitals/diagnostic centres, (d)
any other industry where a minimum of 60 per cent of its
output is exported and (e) industry reserved for small-scale
sector where the minimum of 75 per cent of its output is
exported.
To facilitate such direct investment in new
issues, the issuing companies have to obtain the required

approval from the Secretariat of Industrial Approvals (SIA),
and RBI, and the NRIs are not required to submit a separate
application to the RBI.
Repatriable 100 perzent Scheme

NIlls are also permitted to make bulk investment on
private placement basis upto 100 per cent of equity capital
of sick companies, either by way of purchase of equity
shares from the existing shareholders or in the form of
subscription to new equity issue of the sick companies.
Such bulk investments will be permitted for repatriation
only after a minimum period of five years, on merits of
individual cases after taking into account the future
payment liabilities of the sick companies.
To facilitate
such direct investments, the concerned companies have to

obtain the required permission for offering the shares to
NRls. The NRIs are not required to submit separate
application to the RBI.
NRTs are also allowed to make investment in free
trade zones upto 100 per cent with repatriation benefits in
respect of capital and income earned thereon.
At present
there are six free trade zones-at Bombay (Santacruz

Electronics Export Processing Zone), Kandla in Gujarat,
Coct~inin Kernla, Madrns in Tamil Nndu, 1:nlLa
ill
WrsL
llcngal
and Noida in Uttar Prndesh.
Portfolio Investments in Shares/kbentures Through Stock

Exchange
NILIS can invest in shares and debenLures quoled on
stock exchanges in India; and such investment could be made
with full benefits of repatriation 01 capital invcstmcnt and
income thcrcon or on non-repatriation basis.
Repatriation Basis Portfolio Investment

If the portfolio investments are desired to be on
repatriation basis, (a) purchase of shares/debentures has to
be made through a recognised stock exchange in India at the
rates prevailing on the floor of the stock exchange, (b)
each NRI should ho1.d not mora thnn onc pcr c r n t of t,hr p n i d
up value of the equity capital or each series of nonconvertible debentures of the company, and (c) purchase of
equity shares and convertible debentures is subject to an
overall ceiling of five per cent of the company concerned
and five per cent of the total paid-up value of each series
of convertible debentures of the company concerned.
This
limit of five per cent applies to the portfolio investments

on both repatriable and non-repatriable bases and, (d)
payment for such investments have to be made by fresh
remittances from abroad or out of funds held in the
NRERIFCNR account in India.
Nos-Repatriation Basis Portfolio Investment

However, if the portfolio investment is to be made
without the benefit of repatriation, then such an investment
could be made from the NRO account also.
Further an NRI
cannot hold more than one per cent shares of equity capital
and convertible debentures of the company on repatriation
basis; the investor can, however, acquire shares in exces$
of one per cent, within the overall limit of five per cent,
on non-repatriation basis.
Portfolio investment in non-convertible debentures
floated by Indian companies and Master shares of UTI through
stock exchange is also allowed with full-benefits of

repatriation of capital and income earned thereon without
any limit. But the holding of the shares for a minimum
period of one year is required to claim repatriation
benefits.
Further, portfolio investment In non-convertible
debentures of Indian companies and Master shares of UTI
through stock exchanges in India are allowed without limit
for investment on non-repatriation basis.
Deposits With Companies

NRIs could deposit in Indian Public Limited
Companies on repatriation basis, provided the funds for
investments are received by sending remittances from abroad
or from their NRERIFCNR account.
Such deposit could be
ncccpted by Ltie compnnics within the limits prescribed Lor

acceptance of deposits in conformity wlth the prevailing
rules and subject to further limits and condltlons as may be
prescribed by the RBI.
Such deposits have to be made for a
period of three years and have to be designated in Indian

rupees.
Deposits on non-repatriation basis also could be
made by NRIs from the NRO account as well.

T o facilitate such investment, the required
Permission could be obtained by the companies concerned, and
it would not be necrsenry lor N H l s to srrk nrl)nrnlr

permission from the RBI in such cases.
In India several companies accept iixed deposits
both on repatriable nnd non-rcpntriablc bn.ws.
T l ~ c inlcrest
rates are higher than on bank deposits because of an element

of risk in case of company failure.
The interest rate is
about 14 per cent for a three-year deposit, and interest

income is taxable.
Investment in Various Scbemes of UTI

UTI offers opportunities to NRIs for investment in
several schemes. It provides every Indian
a chance to have
a stake in a large number of select companies through

shares, securities, etc.,. UTI pools the investment of a
large number of NRIs and carefully invests the funds. Units
can be purchased through banks for stockholders/dealers.
The investment are repatriable if made in foreign exchange.
Dividend income is paid every year.
Of special interest is the Children's Gift Plan.
Under this plan the investment can be made in a child's namb
(upto 15 years) as a gift.
The accounts continue to grow
through automatic reinvestment of income.
At the age of 18
for girls and 21 for boys, the accumulated lump sum is a

Prize scheme under which there is a draw every year and
several prizes are awarded.
Invostlonts in Cmvcrnmnt Securities
Investment in Central or Statc Government

Securities is allowed on repatriation as well as nonrepatriation bases without any limit.
However, if such an
investment is made out of the NKO account balance, no

repatriation could be allowed. Nllls are alsn allowed to
invest in public sector bonds and mutual funds set up by the
commercial banks, Life Insurance Corporation of India (LIC),
and UTI on non-repatriation basis.
Investment in National Saving Certificates (NSCs)

Facilities are available for NRIs to invest in
the NSCs.
These are of fixed maturity period of six or
seven years. Such an investment is exempted from all direct

taxes in
India.
Interest rate for the investment against
foreign exchange is one per cent higher.
Investments can be
made through banks, post offices and other authorised

brokersJdealers.
The investments normally double in six
years.
NRI Bonds 1988

In order to attract further NRI investments in
India, a new scheme called 'NRI Bonds 1988' has been
introduced in November, 1988.
The NRI bonds are US $
denominated bonds issued exclusively for NRIs.
The bonds
bear interest at the rate of one per cent above the rate
applicable to 'three year 'FCNR US $ deposits' in India as on
the date of 1,l~cningof Lhc issuc of NIII bonds.
l'hr
intcrcst
on these bonds will be compounded half yearly in US $ and

will be payable in Indian rupees along with the principal on
maturity after seven years.
A novel feature of this scheme
is that these bonds will continue to be denominated in US $

till maturity even if the NRI investor becomes a resident in
India, or gifts them away, or translers them in favour of
another NRI.
There is also a provision to allow transfer
of the NRI bonds by way of gift to a close relative (even a

resident Indian) after a lock-in period of three years, and
in such a situation the resident Indian could continue to
hold it on the same terms and conditions.
Further, liberalization and revision of terms are

being considered to make the bonds more attractive so as to
mop up a good amount of foreign exchange and shore up the
deteriorating balance of payment position.
It is stated
that premature encashment with reduced interest may be

allowed even before the three years' lock-in period.
The
gift of the bonds may also be allowed within the lock-in

period of three years and payment of interest may be made
annually instead of on cumulative basis on maturity.
Facilities for Returning Indians
NRIs desiring to return in India for securing

suitable employment, or for exploring possibilities of
setting up small scale industrial
units in India, or for
any other exploratory purposes may return to India; yet they

may be permitted to hold their foreign currency assets
abroad for a period upto five years, subject to their
compliance to the terms specified by the RBI.
Returning
NRIs could avail themselves of the 'Returning Indian Foreign

Exchange Ent i tlement Scheme' (RIFEE Scheme).
Under this
scheme an NRI can avail himself of foreign exchange upto 50

per cent of the total amount of foreign exchange repatriated
into India, and balance held in this NRERIFCNR account at
the time o f trnnsfrr
of
rrsidrnrr.
Foreign exchange against this entitlement can be

availed of by such persons for themselves or their
dependents for specified purposes which include travel
abroad, medical treatment abroad, foreign education, gift
remittances to a close relative on special occasions, import
of special appliances for professional use subject tw
compliance with import licensing formalities, and the
premium on foreign currency life insurance polices. Such
benefits could be availed of for a period of 15 years
reckoned from the date of return of the head of the family
to India for permanent stay.
Facilities to WBIs Under EXIY Policy

In terms of the Import and Export Policy 1988-1991
(EXIM Policy), NRIs are given certain special facilities in

the matter of import of capital goods, raw materials,
components, consumables and spares for setting up new
industrial units, for participation in expansion or
diversification of an existing unit.
The entire foreign
exchange involved in the import is to be provided by the NRI

out of foreign exchange earnings and resources abroad on
non-repatriable basis.
To expedite decision making and clearance of NRI
proposals, a 'Special Approval Committee (SAC) for NRIs' has
been set up in the Department of Industrial Development
(DID).
The import of capital goods by NRIs has been
exempted from the advertisement procedure for capital goods.

NRIs are allowed to enjoy import facilities to set
up amusement parks in India.
Such imports have to be fully
financed out of NRI's own foreign exchange earnings and

resources abroad, and have to be undertaken withaut
repatriation benefits.
NRIs returning to India for permanent settlement
are allowed to import professional equipment and office
machinery which have been used by them abroad for at least
one year prior to their return to India.
They are also
allowed to import computers and computer based system

without any restriction on the minimum configuration.
NRIs
could also avail themselves of import conmssions in terms

of special scheme for electronics industry.
Import of raw
materials, components, consumables and spares for setting up

of new industry by NRIs could be allowed for a period of the
first three years (subject to a maximum of Rs.5 lakhs in
value each year).
SBI Bond I1 Issue

Since the SBI's first series of NRI bonds issued
in 1988 attracted investment to the tune of about 92 million
US dollars, it has received clearance from the GO1 for
issuing 'US dollar denominated NRI bonds' for NRIs for a
second time, and is expected to raise 200 million dollars.
The bonds will have a maturity of seven years with

the interest rate one per cent above the rate applicable to
three year FCNR US dollar deposits in India prevailing as on
the opening date of the issue.
This scheme offers a long-
term instrument where the interest and principal would be

totally exempt from income and wealth taxes, even if the
bondholder returns to India permanently.
Also the scheme offers both cumulative and noncumulative payment of interest.
In the case of cumulative
bonds, interest calculated in dollars would be compounded

half-yearly and paid on maturity. The maturity proceeds and
periodical interest would be paid in non-kpatriable Indian
rupees, after applying the prevailing dollar-rupee exchange
rate.
Subscription to the issue which is being managed
by the SBI Capital Markets Limited is open only to
individual NRIs.
The investment can be made either by fresh
remittances, or balances held in FCNR or NRER or FCNR

Special Deposit Scheme introduced for Gulf NRIs.
Special Deposit Scheme for Gulf NRIs

The RBI has launched a new scheme called Special
Deposit Scheme for the benefit of NRIs in West Asian
countries.
This was the follow-up to the repeated requests
by NRIs from the West Asia, pleading for the introduction of

FCNR account scheme with facility of withdrawal of full or
part of the sum deposited without notice, and providing
exchange protection to the depositor.
Accordingly, FCNR special deposit scheme (FCNR
SDS) for the West Asia hag been designed with the following
salient features.
The scheme is open to NRIs as well as
OCBs owned by Indians resident in the West Asia; deposits
would be designated under the scheme in US $ only and they

could be placed with designated branches of any authorised
dealer in India.
Under this scheme, the deposit m l d be open-ended
in terms of the period; there would not be a definite term.
Accounts under the scheme could be opened, provided, funds
for the purpose are transferred to India in an approved
manner from the country of residence of the prospective
account holder, or from any other foreign country in the
external group.
The scheme also provides for withdrawal fully or
partially of the balances by means of instructions conveyed
to the bank.
No interest would be payable on balances
standing to the credit of the accounts maintained under the

scheme.
The exemptions-in regard to wealth tax and gift
tax as applicable to balance under the existing FCNR scheme
would alsa be applicable to balances held under this scheme.
The scheme has come into effect from August 21, 1990.
These are all the major investment opportunities
available to NRIs in India.
The major incentives and
concessions, including tax benefits, that are available to

NRIs in India are discussed briefly in the following
subsection.
Incentives and Concessions to NRIs
Tax Incentives to NRI Investors Under Incme Tax Act (ITA)

For individual NRI investors, total exemption from
income-tax is available on the following incomes:
a.
Interest income from NRER account
b.
Interest income from FCNR account
c.
Interest income from the NRI Bonds
d.
Interest
income
from NSCs
and
other
specified
Government Securities
of UTI
e.
Dividend income from units
f.
Any other income from investments, in foreign exchange,

except real estate.
Such
exemption
investments have
been
is
available,
made by remittance
provided,
of
funds
the
from
abroad or through NRERIFCNR account.

There
are special provisions relating to
certain
incomes of NRIs introduced in the ITA which could be availed

by
NRIs
at
Provisions,
their
option.
In
terms of
these
special
in the case of NRIs, the investment income
income by way of long-term capital gains derived
from
and
any
Foreign Exchange asset is to be taxed at a flat rate of 20

per cent.
Other income of an NRI will be treated as an
altogether separate block and charged to tax in accordance

with other provisions of the ITA.
In the case of an NRI who becomes a resident in
India in a subsequent year, the special provisions of
taxation at flat rate would continue to apply in relation to
the income derived from certain foreign exchange assets
which presently covers all specified assets
in Indian companies.
except shares
Thus income from shares in Indian
Companies by way of dividends as well as long-term capital

gains on this account will be taxed as income as per other
provisions of the ITA.
For'income from the other specified
assets the special provisions would continue to apply until

transfer or realisation into money of such assets.
Tax Incentives Under Wealth-Tax Act (WTA)

Incomes derived out of specified foreign exchange
assets are also exempted from WTA.
In order to avail
himself of this exemption an NRI should not be resident in

India within the meaning of the ITA during the year ending
on the relevant valuation date.
Balances standing to the
credit of an NRI in the NRER and FCNR accounts are exempted

from wealth-tax i'f such a person is an NRI under FERA though
he may be a resident under ITA.
Investment in units of UTI by NRIs through

remittances from abroad or from their NRERIFCNR account is
totally exempted from wealth-tax.
In respect of NRIs who returb to India for
permanent residence, money and the value of assets brought
by him into India and the value of assets acquired by him
out of such money within one year immediately preceding the
date of his return or at anytime thereafter will be
considered as exempt from wealth-tax.
This exemption will
be for a period of seyen successive assessment years

commencing from the next assessment year following the date
on which such a pcrson returns to India. I t tins been
clarified that the balance in NRER account and FCNR account
as on the date of return of the NRI will be considered for
exemption from wealth-tax for seven successive assessment
years. Exemption is also available to NRIs for investments
made in specified companies by way of contribution to
initial issues of capital made by such companies.
Tax-Incentives Under Gift Tax Act (GTA)

A gift made out of the money standing to the
donor's credit in an NRERIFCNR account is exempted from

Gift-tax.
Gifts made in foreign exchange remitted from
abroad to an NRI'S husband, wife, brother, sister or lineal

ascendant or descendant are also exempted from gift-tax.
Evolution of Liberalization Policies

The present investment ~ p p o ~ t u n i t i e sand the
relative benefits available to NRIs have been discussed in
the previous section.
The liberalization policy of the GO1
and the RBI on the NRI investments is discussed briefly in

this section.
With a view to attracting remittances from NRIs,
the then Union Finance Minister announced in the Budget
speech for 1982-83 liberalized facilities in regard to bank
deposits and investment in equity shares of the corporate
sector.
Subsequently, in July and August 1982, these
facilities were further liberalized and extended to cover

preference shares and debentures issued by Indian companies.
Concurrently, the RBI simplified the exchange control
procedural formalities to facilitate such investments.
Hitherto, the facilities available for deposits in
non-resident accounts and investments in shares of Indian
companies were confined to non-resident individuals of
Indian nationality or origin.
The entire gamut of the liberalized facilities has
been extended to OCBs (overseas companies, partnership
firms, trusts, societies and other corporate bodies) in
which atleast 60 per cent of ownership/beneficial interest

is rested in non-resident individuals of Indian nationality
or origin.
Further, the equity shares allotted on concession
would be, in addition to the shares of the concerned
company, purchased through stock exchange upto the limit of
one per cent of the paid-up equity capital. No limit either
on quantum or on value is stipulated in regard to purchase
of non-convertible debentures.
Apart from the purchase of shares and debentures

through stock exchange, NRIs including OCBs owned by them
are now permitted to invest, with repatriation benefits, in
the capital raised by any new or existing company (other
than a FERA company) through new issues of equitylpreference
shares and convertiblelnon-convertible
any monetary limit.
debentures without
However, in the case of new issues of
shares and convertible debentures through prospectuses, NRIs

and corporate entities aFe allowed to invest upto 40 per
cent of the new capital raised.
They have also been
permitted to invest in the capital raised, other than

through prospectus, upto 40 per cent of the new issues of
shares and convertible debentures of any company (public or
private limited), subject to a quantitative ceiling of Rs.
40 lakhs.
The liberalized facility of direct investment by

NRIs is confined only to capital raised by Indian companies
for
setting
up
new
industrial
expansionldiversification
of
projects
existing
or
for
industrial
undertakings. However, with the abolition vf the list of

industries which was hitherto not open for direct investment
by non-residents, and with the addition of the hotel
industry, the scope for investment by NRIs has now been
widened.
The facility of NRI investment upto 74 per cent in
equity capital raised by companieslpartnership firms engaged
in priority industries has also been extended to direct
investment in new issues of convertible debentures1
preference shares; it covers investment in hotels with at
least three star rating.
The
GO1
has permitted equity share holding of
foreign investors to be maintained at a level of 51 per cent

or below, i.e., the same level of foreign equity which the
foreign majority companies have been allowed to retain under
FERA even when there is a likelihood of its reduction as ,a

result of the exercise of the 'convertibility clause' option
by financial institutions. This is, however, subject to two
provisions, viz., (1) the foreign shareholders bring in the
required foreign exchange in cash to acquire the shares at
about the Mlrket price to maintain the stipulated level of
foreign equity holding and (ii) the required special
resolution under section 81 of the companies Act, 1956 is

passed.
Liberalization of Tax Provisions

Following liberalization in the facilities for
portfolio and direct investment made available to NRIs in
the Budget for 1982-83, the GO1 modified in the Budget for
1983-84 also, the tax provisions applicable to NRIs, other
than companies, with a view to augmenting the flow of their
remittances into selected financial assets in India.
The
assets specified in this regard are: (i) shares in Indian

companies, (ii) debentures issued by and deposits with
public limited companies, (iii) securities issued by the
Union Government and (iv) units of UTI.
The Union Government may specify by notification
in the Official Gazette .any other assets, which would be
subject to modified tax provisions. Under the new
provisions, investment intome derived by an NRI from the
specified investments and long-term capital gains arising
out of transfer of these assets would be charged to incometax at a flat rate of 20 per cent plus surcharge of 12.5 per
cent of such income-tax. The investment income arising from
these assets as also long-term capital gains would be
treated as a separate block and not aggregated for tax
Purposes with any other income.
Further, if an NRI's income consists only of

investment income and long-term capital gains no flat rate
should apply to him.
In cases where such an option is
exercised by an NRI, the whole of this total income would be

charged to tax under the general provisions of the ITA. The
budget also envisaged that the long-term capital gains
arising from the transfer of any foreign exchange assets are
exempted from tax if (a) the net proceeds realised are
reinvested or deposited by the NRI within six months in any
other specified asset or i n an NRER account in any bank in
India or in savings certificates notified by the Government
and (b) the new assets including nrly dcposit ncquircd are
held for a minimum period of three years from the date of
acquisition.
The budget also provided for an exemption from
wealth tax of the value of foreign exchange assets acquired
and held by NRIs.
Also gifts of foreign exchange assets by
NRIs to their relatives in India would be exempt from Gift

tax.
An additional interest of one per cent on investments
by NRIs in the Six-Year NSCs would be paid to them,

provided, subscriptions for these certificates are received
in foreign exchange.
Facilities for Investment in Company Deposits

NRIs were also permitted to place funds with
Public limited companies (including Government undertakings
with limited liability) in India, with full repartiation

benefits, if deposits were made for a period of three years
and certain other conditions were fulfilled.
was also extended to OCBs.
This facility
As regards investment by NRIs
and OCBs in the Government Securities including Six-Year

NCSs,
the RBI had clarified that investments on a
repatriation basis, in certain certificates and securities

like NCS VI and VII issues, can be made only by NRIs and not
by OCBs predominantly owned by them.
However, these
institutions are allowed to invest in certain other types of

certificates like NSC I 1 issue, subject to certain monetary
limits.
Direct investment in new issues with full
repatriation benefits, under 40 per cent and 74 per cent
schemes, has been permitted to be made in hospitals as well.
With a view to promoting investment by NRIs and OCBs owned
by them in new issues of, shares and debentures under the
direct investment schemes, the RBI decided to permit Indian
companies to appoint agents abroad for securing such
investments; they would pay compensation upto a reasonable
extent on the basis of the quantum of investment actually
made through the agents.
With
view
to
facilitating
expeditious
repatriation of sale proceeds of investments made by NRIs,

the designated banks can now immediately repatriate such
funds with the permission of the RBI, even without
production
of no objection
certificate/tnx
clenrance
certificates. However, the repatriable amounts are confined

to the cost of acquisition of investments sold or the actual
sale proceeds realised, whichever is lower; the balance
amount, if any, is allowed to be repatriated on receipt of
the relevant tax certificates.
As regards the portfolio
investment by NRIs in equity shares on a repatriation basis,

the RBI stipulated that such investments would have to be
held for a minimum period of one year before the sale
proceeds of such shares were permitted to be repatriated.
Liberalization to Portfolio Investments

In May, 1983, relaxations granted
investments were sub~ected to a specific limit.
to N R I
An overall
ceiling of (a) 5 per cent of the value of the total paid-up

equity of the company concerned and (b) 5 per cent of the
paid-up value of each series of convertible debentures was
fixed on purchase of equity shares and convertible
debentures, through stock exchanges, on repatriation and
non-repatriation bases. The limit is applicable in relation
to all such purchases, taken together by all categories of
NRI investors, viz., non-resident individuals of Indian
nationality or origin, overseas companies, partnership
firms, societies and otheq OCBs owned by such persons, but
separately for (a) equity shares and (b) convertible
debenture series.
The equity shares acquired on conversion of

debentures will not be included in the 5 per cent ceiling.
Designated banks have been permitted to purchase on behalf
of NRI investors upto this overall limit, without the
specific approval of the RBI for each transaction.
Any
purchase of equity shares and convertible debentures in

excess of this limit will require the prior and specific
approval of the RBI.
Abolition of Estate Duty

In the Budget for 1985-86, the GO1 abolished the
Estate Duty which was considered one of the major hurdles in
the way of inward remittances to India by NHIs.
Further,
the abolition of surcharge on income-tax introduced in the

Budget would result in an effective reduction in the flat
rate of income-tax from 22.5 to 20 per cent; this in turn is
expected to attract investments in debentures and shares of
Indian companies and company deposits by NRIs.
Special Provisions to Authorised Dealers

The liberal policy for encouraging portfolio and
direct investment by NRIs and OCBs was continued during the
year 1985-86 also.
Previously, NRIs were required to make
application to the RBI for the purpose of saleltransfer of

their holding of shares/debentures in listed companies
acquired by them with repatriation facilities.
During the
year, to expedite the processing of such applications, it

was decided that NRIs could approach an authorised dealer;
the dealer would obtain permission from the RBI for
sale/transfer, as well as for remitting the sale proceeds,
or will credit them to NRER or FCNR accounts on production
of a no objection certificate from the Indian tax
authorities.
Extension of Area of Investments in to New Fields

The policy for encouraging portfolio and direct
investment by NRIs was further liberalized during the year
1986-87.
Accordingly, the GO1 announced certain facilities
such as follow.
a.
The extension of the facility of direct investment

under 40 per cent scheme by NRIs to companies engaged
in
development
of
computer
software
and
oil
explorations.
b.
Permission to NRIs to subscribe to the Memorandum and

Articles of Association of a new company.
c.
Permission to Indian companies with more than 40 per

cent NRI interest to acquire immovable properties in
India, which may be necessary for or incidental to
carrying on their industrial activities on submission
of LO1
(Letter of Intent), or IL (Industrial Licence),
or certificate of Registration (COR)

Government Authority.
from appropriate
Since July 31, 1986, to
facilitate prompt remittance of dividends, authorised

dealers have been granted permission for the remittance
of dividends to NRI shareholders, irrespective of the
face value of the equity shares, or percentage of the
issued equity capital held by such NRIs, without the
prior approval of the RBI in respect of non-FERA
companies. Only applications of FERA companies are
required to be submitted to the RBI.
Further, NRIs have been allowed to invest

i) upto 100 per cent of the equity capital in sick
industrial units,
ii) in new issues of Indian shipping companies under the 40
per cent scheme, and
iii) in 'Diagnostic Centres' in India under "40 per cent
scheme" or "74 per cent scheme."
Besides, it has been decided to remove the
quantitative ceiling of Rs.40 lakhs for making investments
in India by NRIs in private limited companies under the "40
Per cent scheme".
70
The liberal policy of encouraging direct and

portfolio investment by NRIs was continued during 1987-88
also. In the Budget for 1987-88, the GO1 had announced that
income accruing to NRIs on transfer of foreign exchange
assets and held by an NRI for a period of more than three
years would be treated as long-term capital gains and be
subject to income tax at the flat rate of 20 per cent.
However, if the NRIs reinvested or deposited
the net
proceeds realised on transfer of any foreign exchange asset

in any other 'specified asset', or NREH account in any bank
in India, or in savings certificates within six months of
transfer, no tax would be levied. Besides, the Government
declared certain facilities such as (a) permission to
authorised dealers to allow repatriation of sale proceeds of
shares abroad, or credit thereof to the NHER account of the
sellers after payment of taxes in India, and (b) extension
of permission to consider the applications for grant of
rupee loans/overdrafts to NRIs for investments in India;
such investments were to be made against fixed deposits held
in the borroxx-s' NREIi/FCNR accounts; one condition was that
investment should not be made in commercial activities,
agriculturalJrea1 estate business, predominantly internai
trading activities as also in portfolio investments.
Liberalization in the Period of Stay in India

Section 6 of the ITA was also amended and the
maximum number of days of stay in the country in a year was
increased from 90 days to 150 days.
The 90-day period was
too short for those who had to supervise investments in

India.
The then Finance Minister suggested that section 195
of the ITA would be amended so that deduction of tax at

source should be made only at the time of payment of dues
(like interest income), and not when these dues are credited
to the accounts of the NItIs.
The Finance Act of 1987 had provided that
deduction should be made at the time when the dues were
credited or paid, whichever was earller. This had adversely
affected the flow of funds from the NRIs into the country.
T'UMD OF NRI INVESTMENT IN BANK DEPOSITS
Introduction
Evolution of the investment opportunities
available to NRIs and the liberalization policies of the GO1
on NRI investments in India have already been discussed in
thc second ctlnptcr. Tllis cllnptcr is nn ~~LtcmpL
to sLudy ttlc
impact of exchange rate variation, and interest rate changes
on
NllI
investment in bank
deposits.
l'llc n~lnlysis relics
upon statistical tools such as percentages, growth rates,

standard deviations, coefficient of variation and standard
errors.
Trend equation analyses are also made to find out
statistically the significance of the growth rate of

deposits.
Simple and multiple correlation analyses, and
simple and multiple regression analyses with two and more

variables are also used to bring out the relationship and
dependency of deposits on different variables.
NRI bank deposits along with compounded interest
have soared to R6.1,35,000 million by the end of 1988-89,
and' have been growing by a whopping 35 per cent a year.
Official figures normally value such deposits at the current

exchange rate with the steady depreciation of the Indian
rupee.
This would mean that the country's debt to NRIs is
doubling every two to three years.
At this rate it could
touch Rs.10 lakhs million by the end of Eighth Plan (1991 to

1996).
The interest payment alone on this would exceed Rs.
one lakh million a year.
This is more than half of India's
export earnings of the year 1987 to 1988.

NRI bank deposits, among other sources, constitute
88.5
per cent of the total inflow from NRIs.
About 68 per
cent of the foreign exchange reserves are offset by the

liability on account of the hard currency deposits held by
NRIs.
The NRER Account Scheme was introduced in February
1970
under which NRIs or individuals of Indian origin could
open deposit accounts designated in rupees. They can do so

at the par value prevalent at the tlme of deposit, with
banks in India by remitting funds from abroad.
Accoun L Schcme, whl c
l ~was
The FCNR
il~Lroduccd 111 Novcml)cr, 1975
permit deposits in designated foreign currencies.
The
initial remittances may b r mndr from abroad, or by

conversion of the existing NRER accounts maintained in
rupees with authorised dealer banks.
NRIs, irrespective of the country of residence,

are permitted to open the above said two accounts.
Such
facilities are also
extended to N R I S living in the
Bilateral Group Countries, such as, USSR, Poland, East

Germany, Czechoslovakia, Rumania, etc.
The NRI account holders can authorise persons
resident in India to operate these accounts under power of
attorney, or other appropriate authority granted by the
NRIs.
But such authority should extend only to withdrawals
for local payments in India.
As the funds in NRER accounts
are fully repatriable, any payments made from such accounts

are considered as equivalent to approved remittance of
foreign exchange.
It is gratifying tu note that NRER and FCNR
accounts are popular among the NRIs, and the outstanding
balances in these accounts have been steadily increasing in
recent years.
As at the end of June 1989, the total NRI

I
bank deposits under the NRER and FCNR accounts amounted to

approximatel y Its.15,788 crores.
Of
tllrsc , Its.5,953 crores
were held in NRER accounts, and Rs.9,835 crores in FCNR

accollntn .
However, the economic survey of the GO1 does not
include these deposits within its computation of the overall
external debt of the country.
Under international
conventions, these are also treated as liabilities rather

than assets.
In a sense, these deposits are liabilities
because they have to be repaid with interest at the time of
maturity, like any other commercial loan. NRI deposits with

banks in India are lending excellent balance of payments
support to India's economy at this critical juncture of its
development. Here, it is attempted to find out the progress
of the NRI bank deposits using appropriate statistical
tools.
Taule 111.1 discloses the outstanding balances of
NRER and FCNR deposits over a period of 10 years, ie., 1979
to 80 to 1988 to 89.
A casual look at the table shows that
in the initial years, NRER accounts; attracted greater NRI

preference for example, during 1979 to 80, out of a deposit
of Rs .fit70 crorcs, I llr sllnrr
oI
I l ~ r . NI11?1L r~cc~o1111
L wns 77.0 4
per cent, whereas, that of FCNR account was just 26.06 per
cent.
This trend continued upto 1984 to 85.
It seems that
the NRIs have relied upon FCNR account from 1985 to 86

onwards.
For example, during the year 1988 to 89, of the
total deposits of Rs.15,788 crores, FCNR account has won a

major share, i.e., 62.29 per cent, leaving 37.71 per cent to
NRER account.
The overwhelming response of the NRIs to FCNR
account clearly indicates the fact that they bother much

about the exchange rate variation, and that is why two third
of the preference of NRIs is for FCNR accounts.
It is clear from the table that out of tho total
deposits made by NRIsl NRER deposits are in a declining
trend to the extent of 37.71 per cent in 1988 to 89 from
TABLE 111.1
Outstanding Balances of
NlWt Account and PUlR Acwunt Deposit
(Rs .in Crores)
Year
Ending
31st March
Deposit
Total
----------------------------(2+3)
NRER Account
FCNR Account------------- --------------------------- -------------1
1979-80
530.00
(77.94)
150.00
(22.06)
680.00
(100)
1980-81
937.74
(83.82)
181.00
(16.18)
1118.74
(100)
1981-82
1259.04
(90.32)
135.00
( 9.68)
1394.04
(100)
1982-83
1679.20
(81.86)
372.00
(18.14)
2051.20
(100)
1983-84
2254.26
(76.15)
706.00
(23.85)
2960.26
(100)
1984-85
2863.95
(75.00)
954.62
(25.00)
3818.57
(100)
1985-86
3461.42
(61.27)
2188.22
(38.73)
5649.64
(100)
1986-87
4336.20
(55.26)
3511.11
(44.74)
7847.31
(100)
1987-88
5107.00
(50.80)
4947.13
(19.20)
10054.13
(100)
1988-89*
5953.00
(37.71)
9835.00
(62.29)
15788.00
(100)
Year ending June

Source: Com~iled from the records of the Indian Investment
centre ( A Govt. of India Organization), New Delhi
and The Economic Times, New Delhi, Thursday, May 18,
1989. p.6, and compiled from the Annual Reports and
Bulletins of the RBI for several years.
Note
: Figures in parentheses denote percentages.

76
130.32 pcr ncnt: in 1!1Hl
Lo HZ.
Ilowrvr~r,I.hn I.'l:NIitlr-~n>~l
1.n
are in increasing trend to 62.29 per cent in 1988 to 89 from

16.18 per cent in 1981 to 82.
The growth rate of NRER deposits from 1979-80 to
1981-82 was 33.43 per cent; but the same had declined to
21.43 per cent during the period 1982-83 to 1988-89.
However, the overall growth rate for the study period was
27.36 per cent. The main reason for this declining interest
may be depreciation in the money value of the rupee.
To
identify the relationship between the NRER deposit and

average $ exchange rate, a simple correlation analysis is
It is
made, and the results are presented in table 1 1 1 . 2 .
found from the table that there is a strong positive

correlation between the NRER deposits and the average $
exchange rate as referred by the correlation value of 0.98.
The growth rate for FCNR deposit was less than
zero (-0.03 per cent) ip the period 1979-80 to 1981-82
whereas, surprisingly, the growth rate had increased to
70.92 per cent during the period 1982-83 to 1988-89.
This
may be mainly due to the changes in the Government policy on

NRI investments in the year 1981-82.
Mention may
be made
of easy transfer of funds, liberalization in the procedure

and increase in the differential rate of interest up to two
per cent.
However, the overall growth rate of FCNR deposit
was steadily growing at a rate of 51.94 per cent annually.
avernge $ exchangc ratc, a simplc correlation is nrrivcd at.

It is found from the analysis that there is a positive
correlation of 0.95 (vide table 111.2) between the PCNn
deposit and the $ exchange rate
TABLE 111.2
for Exchange Rates and WI Deposits
Correlation
Co-efficient
('r' value)
Correlation Between
FCNR $ Deposit and AER for $
0.8684
FCNR
0.7439
Deposit and AI:11 for
NRER Deposit and AER for $
0.9831
NRER Deposit and AEIt for
0.8320
FCNR Total Deposit and AER for $

FCNR Total Deposit and AER for
0.9589
0.8736
Source : Computed results from the compiled data.

Though the growth rate of both the accounts was in
inverse proportion, the overall growth rate of the total
deposits (clubbing both the accounts) was 36.96 per cent for
the period.
The growth rate for the first three years of
the study was only 27.03 per cent, and for the remaining
period it rose to 35.44 per cent. Thus, it may be seen that
I
the NRI interest in investing in bank deposits shows an

increasing trend.
The average totall inflow of NRI deposits over the

period amountnd to Rs. 5136.18 crorcs, whcrens, tl~c average
inflow under NRER and FCNR accounts was Rs.2838.18 crores
and Rs.2298 crores respectively.
It is clear from the
analysis that though the FCNR deposits showed an increasing

trend, the average inflow of deposit was higher in NRER
accounts when compared to FCNH nccounts.
This was mainly
due to more inflow of NllER deposits in the initial years of

the scheme.
In ordrr to study thr trcnd and progress in
respect of NRI investment in bank deposits, a simple linear
trend equation is constructed, and the results are presented
in table 111.3.
The trend equation analysis reveals that the
growth rate of NRER deposits (the computed 'b' value 602.02
'
0.9771) is found statistically significant as
and ' R ~ value
proved by the computed 't' value of 18.49. The reasons for
the higher value of the computed trend may be the
liberalization in the investment policy and a margin
interest rate offered by the RBI.
Hence, on the whole, the
growth of NRER deposits has been quite promising.

The growth in FCNR deposits is also estimated with
the help of trend equation. The analysis (vide table 111.3)
reveals that the FCNR deposits have positively increased
( ' R ~ ' value 0.7122), with a growth rate of 27.36 per cent
TABLE 111.3
Trend of NRI Investment in Bank Deposits
Particulars
Type of Deposit
---------------------------
Total
Deoposit
NRER Account FCNR Account

Average Deposit
(Rs.in Crores)
Growth Rate
Trend Value
(Y=a+bx)
2838.18
(1749.28)
27.36
32.551
't' Value
18.4945
value
Co-efficient of
variation
-
5136.10
(4596.19)
51.94
283R.lRt
602.02 x
Standard Error
ill2t
2298.00
(2951.79)
22DR.0Q+
867.3~
0.9771
36.96
5136.1,
+146Y . 3 x
194.91
224.07
4.45
6.56
0.7122
0.8431
128.45
61.63
89.18
---
Figures in parentheses denote standard deviations.

*Significant at 5 per cent level.
per annum, and it is found consistent as the computed 't'
value is significant at one per cent level of probability.
The reasons for the higher value of the computed trend may
be the greater liberalization in the procedure and the
margin interest rates and the decreasing value of the ~ndian
rupee.
In the light of the analysis, a simple correlation
analysis is attempted to understand the relationship between

the FCNR deposit and average f exchange rate, and it is
found that there is a strong positive correlation (0.8736)
between them.
The overall progress of the deposits made by NRIs

is also interestingly on the increase.
The trend equation
analysis, fitted for the purpose, shows that the overall

growth rate is found
'R2' value 0.8431) statistically
significant, witnessed by the computed 't' value of 6.56.
Currency-rise Analysis of FCNR Deposits

As pointed out earlier, the $ and f
designated currencies to operate the FCNR account.
are the
Though
two more currencies, viz., Deutsche Mark and Japanese Yen

are further designated by the 601, for the purpose of the
present study, the $ and
are only taken into account,
since the Deutsche Mark and Japanese Yen have been

designated only at the end,of the year 1988.
Currency-wise analysis of FCNR deposits arc made
in table 111.4. It is clear from the table that the average
$ FCNR deposit is 82 per cent, whereas, the average f FCNR
deposit records only 13 per cent for the period.
The
analysis reveals that the growth rate for $ FCNR deposit

upto 1981 to 82 was going negatively (-0.01
a),
on the other
hand, the growth rate for the remaining period interestingly

increased to 38.93 per cent.
However, the growth rate
(49.52 %) for the overall period of the study shows an

increasing interest of the NRIs in investing $ currency in
FCNR deposits.
The poor show of growth rate for the first
three years may be because of the cumbersome procedure and
TABLE 111.4
Outstanding b u n t of ~RER
and PCNR Deposits Currency-wise Analysis
(Rs.in Crores)
Year
Ending
NRER*
31st March Account
FCNR ~ ~ c o u n t * *
---------- .....................
Grand
Total
(2+5)
Pound
Stcrling
[IS Dollar
Total
---------- ------- -------------------- -------- ---------
-1979-80
530
119
(151)
31
(16.4)
150
680
1980-81
938
145
(159)
36
(20.8)
181
1119
1981-82
1259
101
(105)
34
(21.6)
135
1394
1982-83
1679
248
(246)
124
(80.7)
372
2051
1983-84
2254
249
706
2960
457
(408)
(l(j4.6)
1981-85
2864
618
(499)
337
(218)
955
3819
1985-86
3461
1759
(1419)
430
(236)
2189
5650
1986-87
4336
3047
(2360)
464
(224)
3511
7847
1987-88
5107
4406
(3410)
541
(222)
4947
10054
6648
(4245)
535
(203)
1988-89
*
**
***
5899
Inclusive of nccrucd interest
***
8255
14154
--
Do not include accrued tnterest
Inclusive of Rs.700 crores (848 DM) and Rs.372 crores

(31571 J.Yen)
Source : Commerce Research Bureau, Interest on NRI Deposits;
Need for Frequent Changes, Financial Express (Daily),
10th September, 1985, p.6 and RBI Annual Report
1988-89, Supplement to the RBI Bulletin, July, 1989,
pp.96-97.
Note
: Figures in parentheses are outstanding deposits in
the relevant foreign currencies in millions.
strict rules in the period in allowing the deposits in

India.'
The analysis further reveals that the growth rate
of f FCNR deposit was less than the growth rate of $ FCNR
deposit.
The rate of growth of
FCNR deposit for the first
three years of the analysis was only 0.09 per cent.
The
rate for the remaining period was picking up to the extent

of 15.74 per cent, but the overall growth rate of the P FCNR
deposit was 32.95 per cent growth for the period.
The
increasing trend in the latter period may be due to more

liberalization in the pr~cedures,and higher margin of
interest rates and more depreciation value in the Indian
rupee.
From the simple correlation analysis it is found
that there is a highly positive correlation (0.8684) between
the $ FCNR deposit (vide table 111.2) and $ exchange rate.
Though the growth rate was higher for $ FCNR
deposit than the P FCNR deposit, t h e overall ~rowthrate of
FCNR deposit showed an increasing trend to the extent of
49.30 per cent.
It can be inferred from the table 111.5
that the trend equation fitted for the purpose shows a

sizeable growth ('b' value 654.62) in $ FCNR deposit.
Due
to the increasing interest of the NRIs in the deposit ('R2

value 0.7704) the growth rate is also found statistically
significant, and it is proved by the computed 't' value of
The higher value of the computed trend may be becnuse
5.18.
of the low progress in the initial years of the scheme.

The growth rate for
FCNR deposit shows that the
deposit has grown at 43.52 per cent nnnualfy.
Ilowevcr, it
is found that the growth for the later five-year period is

as high as 70.82 per cent, and that of the former five year
period is 30.88 per cent.
This shows that the NRI interest
in ths deposit is picking up at a higher rate in recent

years.
TABLE 111.5
Currency-wise Trend of NRI Investment in FCNR Deposits
FCNH Account Deposit
Particulars
----------------------------------------Designated in US$
Designated in UK E
Average Deposit
(Rs.in Crores)
Growth Rate
Trend Value
(Y=a+bx)
Standard Error
' t ' Value

1
Value
~
1
Co-efficient of
variation
Denotes Standard Deviations.

**Significant at 0.05 per cent level of significance.
To rlndcrstnnrl thr trrnd nnrl progrrss I I I vr.sl~rcl o r

f
FCNR deposit, a simple linear trend equation is also
constructed (vide table 111.5).
The nnnlysis rcvenls Llrat
the deposit has positively grown ('b' value 6 8 . 0 4 2 ) , nnd the

growLtl rnLc
('112'
vuluc O.3517) Is Lourld Lo bc sLnllslicalLy
significant ('t' value 12.99).

Though the
FCNR deposit has grown at 32.95 per
cent annually, it is found that the growth rate of the

deposit declines during the second five-year period at 16.53
per cent growth, as against 32.95 per cent growth in the
first five years of the study period.
increases to Rs.535 crores in
in 1984.
1!jXR,
But the growth
ns ngninst lts.21!1 crorcs
It is found that there is a highly positive
correlation between the f FCNR deposit and f exchange rate

(vide table 111.2) for the period as proved by the computed
'r' value of 0.74.
Exchange Rates
The wide fluctuations in the exchange rate may
also influence
the NRI deposit in bank accounts.
An
attempt has been made to study the trend in exchange rates

of the designated currencies with reference to growth of NRI
bank deposits.
A clear picture of the exchange rates in
terms of Indian rupee value and how far these rates vary
I
from year to year are presented in table 111.6.
It is seen
TABLE 111.6
Average Exchange Rate for $ and f
Average Exchange Rates (AEB)
particulars
........................................
US$
(RS. / $ ) *
Pound Sterling (Rs. / C )
1980
7.86
18.29
( - )
( - )
17.56
8.66
(9.24)
( - 4.16)
1982
9.46
(8.46)
16.55
(- 6.10)
1983
10.10
(0.:14)
(-
1981
1 5 . 32
H.O:l)
15.19
11.37
(11.17)
( - 0.86)
1985
12.38
(8.88)
15.98
(4.94)
1986
12.61
(1.82)
18.48
(13.43)
1987
13.91
(9.35)
24.76
(25.44)
1988
14.15
(1.69)
25.43
(2.63)
1989
15.49
(8.65)
26.58
(4.33)
1984
Rupees per unit o f Foreign Currency.

Source: Compiled from the Economic Times, New Delhi (May 1 8 ,
1989, p . 6 ) .
Note
: Figures in parentheses denote percentage exchange
rate variation between years.
from the table that the $ exchange rate has gone up from
Rs.8.66 in 1981 to Rs. 15.49 in 1989, registering a two fold
increase for the period, whereas, in case of f exchange
rate, the growth is by 60 per cent for the period.
The table further reveals that the growth rate of
the exchange rate between $ and Indian rupee for the first
five years was 7.66 per cent. The same declined to 4.58 per
cent for the later five-year period.
However, the overall
growth rate of the $ exchadge rate for the period goes up to

the extent of 7.02 per cent.
As it is seen from the
analysis (vide table 111.2) there is a strong positive

correlation between the FCNR deposits
( $ and f).
($
and f) and the AERs
The influence of the varintion in the exchange
rate of $ on FCNR deposit is higher in the former five-year

period as proved by the comparative higher growth rate for $
FCNR deposit and $ currency than in the later one.
It can
also be referred from table 111.7 that the growth rate for
the $ exchange rate is 0.83 (computed 'b' value).
exchange rate has positively grown
( $ 2' value
The $
0.9915) and
the growth rate is also found statistically significant by

the computed 't' value of 30.49.
The trend equation analysis for the f currency
exchange rate shows a p~sitive growth for the later fiveyear period at 10.37 per cent as against the negative growth
rate (-3.64 per cent) for the former five-year period under
study.
However, the overall growth rate for the exchange
rate of the currency was only 3.8 per cent for the period.
To identify the rclntionship bctwccn thc
PCNIt
deposil and P
exchange rate, a simple correlation is fitted. The analysis

reveals that there is a highly positive relationship between
these'two as computed 'r' value of 0.87.
It is also found
that there is a highly positive correlation as proved by the

computed 'r' value of 0.832 between NRER deposit and P
exchange rate.
TABLE 111.7
Trend of Exchange Rates of $ and P
Exchange Rates
particulars
.........................................
$ (Rs./$)
Average Exchange
Rate
Growth Rate
Trend Value
(Y=a+bx)
Standard Error
' t ' Value

2
'It ' Vnlur!
Co-efficient of
variation
11.59
(2.41)
7.02
11.59+0.83xf
0.0274
30.49
0.9915
20.78
(Rs./f)
19.11
(4.19)
3.81
19.41+1.09x*
0.341
3.21
0.51jPH
21.68
Significant at five per cent level.

The analysis further reveals that the growth rate

of P exchange rate has positively been picking up as
witnessed by the computed 'b' value of 1.0967.
The growth
'
0.5628) for the
rate of the exchange rate ( ' R ~ value
currcrlcy is ulso proved
Lo
bc sLuLlsLicully slg~lil'iuur~L
( ' t'
value 3.21) at 5 per cent level of significance. llence it

can be concluded that there is a highly positive correlation
between the exchange rates for the designated currencies and
the NRI deposits in bnnk accounts.
Regression Co-efficient of Total FCNR Deposits and Average

Exchange Rates ( B g R ) for $ and f
Whether the exchange rate differential influences
the FCNR deposits made by NRIs, can be understood by fitting
a regression equation between them.
considering the sizes of AERs of
'$I
and
Accordingly,
'f'
every year as
factors influencing the outstanding as well as the

incremental sizes of FCNR deposit balances, the estimates
are worked out as follows.
FCNR
- 9152.5 + (436.9) AER

(122.4)
$ + (314.32)
( 70.26)
AER f
An overall 'It2 ' value of 0.9467 shows a positive

and significant influence of changes in AERs of ' $ ' and ' f '
on the FCNR deposit balances.
It is mostly because of
f a v o ~ ~ r n hnll~p w vn1110 for ovrry
dvposi t
In Inrilnn
investments. On the other hand, the positive regression coeificient of exchange rates do confirm the consistent
influence of them in attracting thr FCNR deposits.
observed from the 'FI2'
It is
value that the inter-relationship
between the variables is good.
In addition, the growth of
FCNR deposits is found to be highly dependent on the
exchange rates with the regression co-efficients of 436.9

and 314.32 respectively for AER $ and AER
f,
and it is found
statistically significant (computed ' t ' value 3.57 and 4 . 4 7 )

at 5 per cent level of significance.
So, it can be
concluded that the change in exchange rates (of course

favourable to NRIs) will result in increased flow of FCNR
deposits, and banks in India can easily mobilise the
deposits from the NRIs on this account.
Regression Co-efficient of Total NRER Deposits and A W s for

D and C
To understand the inter-relationship between the
growth of NRER deposits and the variation in the exchange
rates of $ and
f,
a multiple linear regression equation is
fitted considering the following variables as
Y
XI=
Total NRER deposits

AER for $
X2=mfort
Here. the variable 'Y' is considered as dependent,

and 'XI, and X2' as independent variables.
pasitive correlation (0.98)
A significant
is found between variables 'Y
and XI,' and 'Y and X2' ( 0 . 8 3 ) .

The summation of regression equation shows t h a l
NRER = -5874.9 + (589.35) AER $ + ( 9 6 . 7 0 7 ) AER 2
35.925
20.624
The regression analysis reveals that it is fitted

best with computed 'R"
value of 0 . 9 9 showing that the
associntion and inter-rrlntionship is ~ o o d .
It rxplnlns
that the growth of NRER deposits is found to be h i ~ h l y

dependent on the exchange rates with regression coefficients of 588.35 and 96.70 for the variables, and it is
found statistically significant (computed 't' value 1 6 . 4 and
4.69)
So, it can be
concluded that a fluctuation in the exchange rates is

considered as one of the important factors which affect the
quantum of NRER deposit.
Accordingly, a rise in the
exchange rates will automatically increase the NRER

deposit.
Interest Rates
Till 1982, resident accounts and non-resident

accounts were considered alike atleast as far as interest
rates were concerned.
Later on, the GO1 has realised the
need for offering higher interest rates for NRI deposits.

As a result, with effect from March 1, 1982 , term deposits
for 'one year and above' made by NRIs carry interest rates
two per cent above the rates permissible on domestic
deposits of comparable maturities.
Though a higher interest rate was offered for NRI
deposits, a uniform rate of interest was maintained for both
NRER and f C N R
deposits for sometimes.
Later, the GO1
realised the need for offering different interest rates to

these accounts.
Since there is an element of exchange risk
associated with NRER deposit, the GO1
came forward to offer
one per cent higher interest rate to NRER

ot the FCNR deposit.
deposit than that
As at the end of December, 1989, the
interest rate for NRER deposit was two per cent more than
the domestic deposit of comparable maturities, and one per
cent more than the FCNR deposit.
Interest Rates on Domestic Deposits Vs. NRER and PCNR

Deposits
The interest rate schedule applicable to domestic
deposits, FCNR deposits, and NRER deposits (table 111.8)
sows that there is no difference of interest rates at all
among the domestic deposits, F C N R
deposits and NRER
deposits upto a period of 'one year' for term deposits.

This means that banks pay the same interest rate of eight
TABLE 111.8
comparative Interest Rate Chart:
RRgR Deposits
JJmestic D e p i t s V s . FQlR and
(per cent per annum)

Period
15
Domestic
Deposits
45 days
- 90 days
- 6 months
FCNR
Deposit
NRER
Deposit
91 days
6.5
6.5
6.5
6 months - 1 year
46
2 years
8.5
9.5
(10.52)
10.5
(19.04)
3 years
10.5
(14.28)
11
(18.18)
5 years
10
11
(9.09)
12
(25.00)
11
12
(8.33)
13
(15.38)
5 years
Source: World Economic Outlook, dated, April '89 published

by IMF.
Note
: Figures in parehtheses denote percentage rate
variation from the domestic interest rates.

per cent irrespective of the type of deposits upto a period'
of 'one year'.
But, for domestic deposits, the existing
interest rates are 8.5 per cent for a period of 'one to two
years', 10 per cent for a period of 'three to five years'
and 11 per cent for a period of'five years and above'. The
corresponding interest rates for FCNR
deposit are 9.5 per
cent, 10.5 per cent, and 11 per cent respectively. For NRER
deposits, banks
offer one per cent more than the FCNR
deposits for all the periods except for the period of 'two
to three years', where the difference is only half a per
cent.
In short it can be said that FCNR deposits command
one per cent more than the domestic deposits, and in case of
NRER deposits it is two per cent margin.
Average Interest Rates (AIRS) on NRgR and PCNR Deposits

The structure of interest rates is presented in
tables 111.9 and 111.10 for the period 1980-89, and it shows
the variation in the interest rates from period to period.
It is observed from the table 111.9 that the AIR for NRER
deposit accounted for 5.77 per cent in the year 1980, and it
increased to 8.16 per cent in the year 1989.
This shows a
growth rate of 3.52 per cent in the rate of interest on NRER

deposit during the past decde.
Table 111.10 shows that the AIR on FCNR deposit
was 5.28 per cent in the year 1980, and the same increased
to 7.5 per cent in the year 1989.
It is understood from the
table that within a decade the rate of interest on FCNR

deposit has grown at 3.56 per cent.
Table 111.11 studies the inter-relationship of $
FCNR and P FCNR deposits with AIR on it.
The 'r' value
0.0364 between $ FCNR deposit and AIR, and 0.6347 between f
FCNR deposit and AIR indicates a positive correlation

between the deposits denominated in both the currencies with
the AIR on FCNR deposit during the study period.
The same
is substantiated with positive correlation between FCNR

total deposit and AIR with an 'r' value of 0.1292.
Thus, it
can be inferred that FCNR deposits have positive correlation

with the AIRS on FCNR deposits as well as on NRER deposits.
TABLE 111.11
for Interest Rates and NRI Deposits
Correlation Co-efficient Between
Correlation
Co-efficient
( 'r' value)
FCNR US $ Deposit and AIR on FCNR

Deposit
0.0364
FCNR f Deposit and AIR on FCNR

Deposit
0.6347
FCNR Total Deposit and AIR on

FCNR Deposit
0.4292
FCNR Total Dcposit and AIR on

NRER Deposit
0.7435
NRER Deposit and AIR on FCNR

Deposit
0.6449
NRER Deposit and AIR on NRER

Deposit
0.8375
But with regard to relationship between the FCNR

deposit and the AIR on NRER deposit, (vide table 111.11) the
correlation is negative as shown
-0.7435.
by
the
'r' value of
But the NRER deposit and AIR on NRER deposit move
in the same direction with computed '"r' value 0.8375

indicating a high degree of positive correlation (vide table
111.11).
TABLE 111.12
on
Trend of Average Interest Rates

PCNR Deposits During 1980-89
NkW and
Type of Account
.........................................
NRER Account
FCNR Account
Average Interest
Rate (in per
cent)
i~mwthRate
Trend Value
(Y=a+bx)
't' Value
'$1
Value
* Significant at 0.05 per cent level of significance.

CV = Co-efficient of Variation.
Tti~~n,
il
in
pr,nri tl~nl wtil l~
ttl~rn :.I
n n l rnrly:
negative corrclation bctwrcn FCNll dcposit nnd AIR or) NllRll

deposit, the relationship between the NIIEIL deposit and the
AIR on it is highly positive.
Table 111.12 shows the growth of interest rate on

NRER deposit over the past decade.
It is understood from
the table that the growth rate ('b' value 0 . 3 2 0 7 )
is
positive for the interest rate on NRER deposit. The rate of

growth
( ' R ~ value
,
0.7961)
is found
statistically
significant as witnessed by the computed 't' value of 5.59

The growth rate ('b' value 0.1829) is also found
positive for interest (vide table 111.12) rate on FCNR
deposits with an overall significant growth rate ( ' ~ 2 'value
0 . 5 2 6 8 ) at 5 per cent level of significance ('t' value
3.0450).
Regression Co-efficient of,.PCNR Deposit and AIRS on NRER and

FCNR Deposits
Whether the interest rates on NRER and FCNR
deposits influence the FCNR deposit can be studied by
fitting a multiple linear regression equation.
The AIRS on
NRER and FCNR deposits can be considered factors influencing
the total FCNR deposit and the estimates are as follows:
Total FCNR = - 9935.9 + (1661.1) AIR on NRER + (5.6433)

AIR on FCNR
( 1865.2)
The regression analysis reveals that the FCNR

deposits are found dependent on interest rate with
regression co-efficient of 1661.1 and 5.6433 respectively.
But the overall 'R2' value (0.3387) explains not a very high
degree of relationship between the variables. Therefore, it
can be said that the FCNR deposits are being mobilised by
banks do not depend significantly on the interest rates on
NRER and FCNR deposits.
Regression Co-efficient of NRER Deposit and A I R s on NRER and

M I 1 Ucposits
When the influence of interest rates on NRER and
FCNR deposits on total NREH deposits is studied with the
help of multiple linear regression, it is found that NRER
deposits are dependent on the interest rate with regression
co-efficient of 1339.9 and 163.13 respectively.
The total
NRER deposit is correlated with AIRS on NRER and FCNR

deposits, and it is found with positive co-efficient of 0.83
and 0.64 respectively.
The ' R ~ '

value of 0.7105 does not
reveal a very high degree of influence of interest rates on

the dependent variable, i.e., the NRER deposit.
The
computed 't' values for the interest rates on NRER and FCNR
deposits are 2.59 and 0.22 respectively.
On the basis of
the analysis, it can be said that the growth of NRER deposit

does not depend much on interest rates on NREll nnd FCNll
deposits.
Regression Co-efficient of Total PCHR Deposit and

and f, and AIRS on PCNR and NMR Deposits
for $
In the mobilisation of FCNR deposits, the

implication and interdependent relationship of AERs for $
and f and AIRS on FCNR and NRER deposits are estimated with
the help of a multiple linear regression equation where
= Total FCNR deposit
XI
Am
for $
XZ = AER for f
X3
AIR on FCNR deposit
X4 = AIR on NI11[11 deposit
Here, the variable 'Y' is considered as dependent,

and the remaining variables are independent. While there is
a significant strong positive correlation between vnrinbles
'Y' and 'XI', and 'Y' and 'X2' ('r' value 0.84 and 0.87),
the positive correlation of 0.42 and 0.58 is found between
variables 'Y' and 'X3', and 'Y' and 'X4'. The regression
analysis shows the following:
FCNR = 1.1331
(3250) AER $ + (-265.32) AER f

(880.84 )
( 265.93)
(-2216) AIR on FCNR+(-3577.6) AIR on NRER

(
1154.3)
'R"
1217)
0.9444.
It reveals that the reeression analysis is best

value of 0.94 showing that the association
fitted with ' R ~ '
is good.
Further, the growth of FCNR deposits is found
highly dependent on the exchange rates and interest rates

with regression co-efficients of 3250, -265.32, -2216, and
3577.6 for the variables, and it is found statistically
significant (It' value 3.31) for the 'x''
variable.
So, it
can be concluded that the FCNR deposits mobilised by banks

in India are highly dependent on the $ exchange rate.
Regression Co-efficient of Total NRER Oeposits and AERs for

$, f, and AIRS on FCNR and NRER Deposits
To study the inter-dependence relationship between

the NRER deposit and exchange rates and interest rates, a
multiple linear regression analysis is made considering the
following variables as
NRER deposit
X1
AER for $
X2 = AER for f
X3 = AIR on FCNR deposit

X4 = AIR on NRER deposit
Here, variable 'Y' is considered as dependent, and

'XI, X2, X3, and X4' are considered as
variables
independent.
It is found that there is a strong positive
significant correlation (0.98) between variables 'Y and XI',

whercns, nomewhnt good relntionship (0.83 cnrll) is Iound
between variables 'Y and X2', and 'Y and X4'. On the other
hand, a positive correlation is found (0.64) between
variables 'Y and X3'.
The regression analysis reveals the following:
Total
AER
AER
-3217.4 + (893.76) for + (21.241) for
Deposit
$
f
(167.2:)
( 45.346)
A NRER
AIR
AIR
(-294.04) on + (-366.61) on
FCNR
NRER
It shows that- the regression equation is best

fitted with 'R2' value of 0.99, explaining that the interdependence relationship is good.
In addition, the growth of
NRER deposits is found highly dependent on the exchange
rates and interest rates with regression co-efficients of

893.76, 21.24, -294.04, and -366.61, and it is found
statistically significant (computed 't' value is 5.34) for

the 'XI' variable.
Therefore, it can be concluded that the
growth of NRER deposits is highly dependent on the $

exchange rate.
Rcgreesion Co-eIficicnt for ToLal NllI UcposiLs (IrCWIl and

N U R ) and
for $ and L, and AIRs o n NEER Deposit
T o understand better the inter-relationship

between the total NRI deposits and the ,exchange rates, and
intere8t rates, a multjple linear regression analysis is
made considering the variables as
Y
= Total (FCNR & NRER) NRI deposits
X1 = AER for $
X2
AER for
X3
AIR on NRER deposit.
Here the variable ' Y ' is considered as dependent,

and the variables 'XI, X2, and X3' are considered as
independent.
A strong significant positive correlation
(0.91) is found between the variables 'Y and XI', whereas, a
positive significant correlation is found between variables
'Y and X2'. and ' Y and X3'.

The followine is found from the regression
analysis:
Total
AER
AER
NRER = -9261.4 + (2387.7) for + (229.19) for
Deposit
$
S
(
723.29)
AIR
+ (-2417.2) on
NRER
(198.56)
It shows that the regression equation is fitted

best with 'R" value of 0.95, explaining that the dependence
is good.
The growth of total deposits is found highly
dependent on the exchange rates and Qterest rate with

regression co-efficient6 of 2387.7, 229.19 and -2417.2 for
the independent variables, and it is found statistically
significant (computed 't' value is 3.3) for the 'XI'
variable.
So, it can be concluded that the growth of NRI
deposits (FCNR and NRER) is highly dependent on the $

exchange rate.
Regression Analysis
PCNR Deposit as Independent and NReR Dcposit as Dcpcndent

Variables
To estimate the degree of dependence of NRER
deposit on FCNR deposit,.a simple linear regression equation
is fitted by considering the FCNR deposit as independent
variable, and the NRER deposit as dependent variable.
The
results of the regression analysis are presented in table

111.13.
It is found from the analysis that the regression,
equation is found best fitted with a higher ' R ~' value of

0.82.
The growth of NRER deposit with a higher regression
co-efficient of 5.36 is found statistically significant (the

computed 't' value is worked out to 6.04).
From the
analysis, it can be concluded that the growth of NRER
deposit is found dependent on the FCNR deposit at a higher

level.
RRER Deposit as Independent and FCWR Deposit as Dependent

Variables
T o better understand
the cause and effect
relationship of the progress of NRI bank deposit (NIIER and

FCNR), a simple regression equation is fitted by considering
the NRER deposit as independent variable and the FCNR
deposit as dependent variable.
The regression equation is
found (vide table 111.13) best fitted with an ' R ~ 'value of

more than 0.82.
It implies that the relationship is good.

TABLE 111.13
Co-efficient of Regression for G m t h of

NRER Deposits on FCNR Deposits as Explanatory
Variable, and Vice Versa, for the Study Period 1980-89
Details of
Regression
'b' Value SE of 'b' It' Value 'R2' Value
--NRER Account
Deposit as
Dependent on
FCNRDeposits
5.3666
8.8876
6.04
0.8201
FCNR Account
Deposit as
Dependent on
NRER Deposit
1.5281
2.5307
6.04
0.8201
--'Significant at 5 per cent level of significance.
Further, the FCNR deposits are found dependent on NRER

deposits with a regression co-efficient of 1.52, and it is
found statistically significant (Computed 't' value 6.04).
Thus, it can be concluded that the growthpf FCNR deposit is
found dependent on the growth of NRER deposits also.
Cost Benefit Analysis of NRI Bank Deposits

The cost and benefits of non-resident deposits to
banks is worked out to find out the profitability of banks
in employing NRI deposits at the prevailing interest rates.
The profitability depends upon several factors such as,
interest cost, interest revenue, servicing cost and
ancillary earnings, etc.
Ignoring the servicing cost and
ancillary revenue, the interest differential between cost of

interest and yield on non-resident deposits is calculated
and used in this analysis.
However, since interest is
considered as the prime motive for longer flow of funds into

non-resident deposits, it can be assumed that deposits
accepted for longer period, say five years and above, carry
interest at the rate of 12 per cent and 13 per cent per
annum on FCNR and NRER term deposits respectively.
As per the directives of the RBI, Commercial Banks
in India are obliaed to keep a certain percentage of their
total time and demand liabilities as Cash Reserve Ratio
(CRR) and Statutory Liquidity Ratio (SLR).
'l'l~ri c - t l r r r - 1 1 1 v ~ i L i ~r,r
>
('1111
I n :I
))!!I,
< . ~ , I I I .w I I I < , I I L H
applicable not only for domestic deposits but also for NRI
deposits.
Even in the NRI deposits, there is no difference
between the FCNR and NRER deposits as-far as the CRR is

concerned.
In case of SLR, commercial banks have to maintain
38 per cent on NRER deposit and 25 per cent on FCNR deposit.
After meeting the reserve requirement, 59 per cent of the

NRER deposits and 72 per cent of the FCNR deposits are
available for deployment purposes.
Further, the banks
cannot make use of these funds as they like since they have
to follow the RBI directives.
According to the RBI
directives, in order to fulfil the social commitments of the

banks towards the society, 40 per cent of the total credit
is to be given to priority sector, preference to food credit
and export credit at concessional rate of interest.
This,
in turn affects not oniy the profitability but also the

lending capacity of the banks.
Table 111.14 is self-explanatory, and it is seen
from the table that in the case of NRER deposit, the
interest loss amounts to 1.18 per cent and in the case of
FCNR deposit, the interest gain works out to 0.16 per cent.
In other words, for every additional accretion of Rs.100
crores of NRER deposit a bank will incur a loss of Rs.118
lakhs in a year.
However, for an addition of Rs.100 crores
TABLE 111.14
Cost of Yllld on NRI Dsposlts In lndlr
I
I
I Deployment
I of Total
1 Dmposlts
I
I
INRER a/c
!per Rs.
I100 : 13
I
I
I
IYleld
I
IYIcId
I
I
:Rots
I
IFCNR a/cIRrte
I
:(Aver- IlnterestIper CI. IlAver- I Intsrest I
:age for IerrningsI100 = 12:nge for I earnlngs I
11-3 yrs)I
11-3 yr5)1
'
'
'
'
8.5
3.23:
25.0'1
64.5'
I
2.83 I
CRR
3.00"
SLR
38.00'1
Lendable
Funds
59.00'
a) PrIorItyI
Sector I
(40 %)"I
23.60
: 12.0
I
I
I
5.31
14.0
0.74 1
5.81 1
14.0
0.81
b) Food
Credit
(DX)'*
I
I
I
C) Export I
Credlt I
(6.5X)*'I
3.64
12.0
0.46 I
4.19 I
12.0
I
I
0.50
d ) Other
2.36
16.0
0.38 I
2.58 I
16.0
0.41
I
Pub.Sec. I
Companies
(4 x)" 'l
I
I
e)Othsrl I
(40.58)"I
10.5"
8.5
0.64"'I
8.5
2.13
I
I
3.10
I
I
I
I
I
1
I
I
25.80 I
12.0
I
I
I
1
I
I
I
I
'l
I
'
ITotalEarnIngs
'
I(Lass) Total I
ICaat
IForsgoInp
ILosslGaIn
23.88
'
I
s
17.5
4.18
11.821
26.121
'
a
! 13.00 1
(
'
17.5
b
I
l
I(-)1.18 I
4.57
I
I
12.16
'
I
I
I
12.00
I
0
t Parcentr#ed on Total D~posit

I * Psrcmntage on Iendabla funds
raw Interest errnlnls are p~ruisnlble only when the CRR Is more than
3 per cent.
I
I
of FCNR deposits, the interest gain to a bank would be Rs.16

lakhs per year.
This loss (on NRER deposit) is on account
of interest cost alone.
If servicing cost in terms of
manpower and other supporting servicw are taken into

account, the loss would be more in case of NRER deposit. In
the case of FCNR deposit, even the meagre amount of gain
will vanish, and it may also draw banks to incur heavy loss.
Of course, banks would have some earnings by way of
commission on inward remittances, exchange profits on
conversion of foreign exchange, etc., but these will not be
so substantial as to offset the increased cost.
TREND OF DIRECT- 1
BY IiRIs
Introduction
An in-depth analysis of bank deposits using

sophisticated statistical tools was made in the previous
chapter.
An attempt has been made in this chapter to
analyse the direct investment made by NRIs.
The analysis
centres around repatriable and non-repatriable direct

investments in key industrial sectors.
Industry-wise,
region-wise trend of NRI investments and state-wise status

of NRI investments in the approved projects are also
analysed adopting appropriate statistical tools.
The NRIs, as discussed earlier, command sizeable
resources in terms of finance, scientific talents and
technical know-how that can be channelised for the
industrial development of
the
country.
An
important
by-product of such investment could also enhance the

opportunities of exports, as they possess the right
contacts, and knowledge about the most competitive situation
prevailing in the world market.
In fact, a large umber of
NRIs settled in developed countries can serve as a huge

reservoir of technical talents: most of them migrated after
their professional education in engineering, science or
technology in India and have worked in these foreign
countries for more than two to three decades specialising in
their area and having the benefit of exposure to and
knowledge about the most advanced technologies.
Attracting
NRI investment, therefore, could serve as a tool for overall

economic development, creating the economic activity through
industry, and generating employment, goods and services.
The Central and the State Governments provide a

number of special facilities, and offer a host of incentives
to NRIs.
Such incentives have stimulated them to take
active part in the industrialisation of India. For example,

the NRI direct investments on repatriation basis was just
three per cent of the tatal NRI investment during 1982-83,
it was more than nine per cent during 1986-87, and it
crossed the 10 per cent mdrk in 1987-88.
Progress of NU1 Direct Investments
The NRI investments under '40 per cent' and '74

per cent' schemes on repatriation basis are presented in
TbBLE IV. 1
Dixqect Investment by MtIs
, .". -..
Direct Investments
Total
(repatri
able and
nonrepatriable)
-------------------------=--------
Year Ending
31st March
Nonrepatriable
basis
Repatriable basis
..........................
40 %
74 %
Total
Scheme
Scheme
(3+4)
(2+5)
----1
-----
1982-83
2.92
(2.67)
50.16
9.47
(84.12) (15.88)
59.63
(95.33)
62.55
1983-84
18.97
(13.25)
22.93
101.23
(81.53) (18.47)
124.16
(86.75)
143.13
1984-85
39.46
(16.11)
28.94
176.47
(85.91) ( 1 4 . 0 9 )
205.41
(83.89)
244.87
1985-86
80.72
(14.91)
41.72
418.93
(90.94) ( 9.06)
460.65
(85.09)
541.37
1986-87
138.38
(13.54)
54.55
829.31
(93.83) ( 6.17)
883.86 1022.24
(86.46)
1987-88
202.61
(16.02)
72.53
989.33
(93.17) ( 6.83)
1061.86 1264.47
(83.98)
1988-89
254.16
(16.71)
83.17
1186.22
(93.45) ( 6 . 5 5 )
1269.39 1523.55
(83.29)
----Source : Jay Narayan Vyas, NRI Invest_ment Policy and

Procedures A Ready Reckoner, Saket Communication
Centre, Ahmydabad, P . 2 and compiled from the
Reports of the IIC and
Bulletins for many
Note
: (i)
(11)
Figures are cumulative

P 1 ~ 1 1 r o in
n pnronthonou nro pnrcontogos to
total. (40 % Scheme and 74 % Scheme are to
total repatriable)
40 Per cent Scheme
It is seen from the table that the interest of

NRIs in the '40 per cent scheme' is increasing as their
share in the scheme was only 84.12 pe;
cent in the year
1982-83 as against 93.45 per cent in the year 1988-89.
In
the light of the analysis it is found that though there is a

sluggish growth in the scheme,
the overall growttl rate
shows a g w d progress of 57.13 per cent for the seven year

period upto 1988-89.
The trend equation fitted for the purpose shows
(table IV.2) that the growth rate for the 40 per cent scheme
is 208.47 ( ' b ' value).
scheme ('R"
Due to increasing trend of the
value 0.95) the growth is found
statistically
significant as the computed 't' value is 9.64.
The reason
for the good results of the computed trend may be the

greater liberalization in the investment policy and
procedures applicable to direct investment schemes in recent
times.
74 Per cent Schese
The NRI investment in '74 per cent scheme' shows a

declining (vide table IV.l) trend of NRI interest in the
scheme.
The NRI investment in the scheme in the initial
year was 15.88 per cent, and it declined to 6.55 per cent in
the year 1988-89.
However, the overall growth rate of the
scheme shows, interestingly, that the investment in the

scheme has been growing at a rate of 36.4 per cent.
It is evident from the table 1V.2 that the trend

equation annlyfiis rcvrnls thal thc lnvestmcnl is welcome
('b' value 12.35).
It is clear that the NRI investment in
the scheme has positively increased ( ' R ~ ' value 0.99), and
the growth rate is also found statistically significant by
It may be inferred that
the enormous growth in the scheme may be because of greater

liberalization in the procedures and policies.
The total NRI investment in repatriable direct

investment schemes (clubbing both the schemes of 40% and
74%) is also increasing at a higher rate.
However, the
share of the direct investment on repatriation basis is

declining compared to-total direct investments (both,
repatriable and non-repatriable).
The total repatriable direct investment was 95.33

per cent in the initial year of the scheme, and it declined'
to 83.29 per cent in 1988-89.
Despite this decrease the
over-all growth rate shows that there is a huge growth in

the scheme at 54.8 per cent.
In addition, it is proved that
the growth rate is found statistically significant ('t'

value 10.06).
Non-repatriable Mrect Investments

The non-repatriable direct investment has a lower
share in the direct investment schemes as a whole. However,
the investment in the scheme has also grown interestingly.
It had only 4.67 per cent share in direct investment schemes
in 1982-83, and it increased to 16.71 per cent in 1988-89.
The analysis also reveals that the NRI investment in the
scheme is surprisingly increasing as evidenced by the growth
rate of 89.3 per cent over the period.
The rate of growth
is also found statistically significant as proved by the

computed It' value of 10.42, and the 'Fi2' value is 0.96.
The overall growth rate for direct investment
schemes as a whole shows that there is a sizeable growth
(57.8 %) in the scheme recording an average investment of
Rs.686.02 crores over the period. The trend equation fitted
for the purpose also reveals that the growth of the direct
investments, as a whole, is proved
statistically
significant, by the comp"ted ' t o value of 10.38 ( ' R ~' value

0.96).
NRIs' Contribution to Key Industrial Sectors
NRI investments in various industries have been

grouped into five major categories such as Metallurgical,
Electrical and Electronic, Paper and Pulp, Engineering, and
Chemicals and
Petro Chemicals. Table IV.3 shows the key
industrial sector-wise NRI investment for the period during

1983-89.
It is seen from the table that the NRIs have, so
far, invested about Rs. 2434 crores in major industries in

India.
Their investment records 35.19 per cent for
Metallurgical sector, followed by Electrical sector

(10.17 % ) .
The share of their investment goes equally to
Engineering lndustry (9.34 %) and Paper and Pulp industries

(9.4 %).
The investment in other categories of industries
HBI Investments in Top

Five Key Industrial Sectors During 1983-89
(Rs.in Crores)
Total
Project
Cost
% to
Total
Metallurgical
856.60
35.19
Electrical and Electronic
247.61
10.17
Paper and Pulp
228.72
9.40
Industry
Engineering
227.40
9.34
Chemicals and Petro Chemicals
226.99
9.33
Other Industries
646.89
26.57
2434.21
100.00
Total
Source: India ~ o d a ~July

, 31, 1989, p.92 and compiled from
the records of the Indian Investment Centre, New
Delhi.
worked out to only 26.57 per cent.
The analysis reveals
that the NRIs evince a keen interest on Metallurgical

industries.
Easy availability of raw materials, climatic
conditions and easy marketability of the output, ctc., are

some of the reasons attributed for their interest.
Industry-rise RBI Investment in India

NRI participation in projects in different areas
of industries are presented in table IV.4.
reveals that NRI
interest is more
The table
in projects on
repat,riationbasis than in those on non-repatrintion basis.

Projects on repatriation basis alone accounts for 63.17 per
cent of the total NRI investment in industries, and the
remaining share of investment is in schemes on nonrepatriation basis.
It is found that the NRI contribution is more in
metal industries (39.44 % ) than in other areas of industries
on repatriation basts; the NRI investment in glass,
mechanical, and photo industries on repatriation basis, is
almost nil.
In the light of the analysis it is found that the
NRI contribution on non-repatriation basis is comparatively
less than that.of on repatriation basis.
It accounts only
for 36.83 per cent of the total NRI contribution

approved projects.
%,
the
It is clear that the NRIs have
: -Typo
of
1 industry
TABLE IV.4
Industry-rlsn NRI Invnstments Durln( 1884-18139
1Rs. In nllllons~
rives nan
j ~ r o j n cI tU.0:; ~@I
IRe atrl-1Non-r*paj
! Cost !ApproI
/atyon 1trIatlon: ~orelgnjResldent[ Lorn :
I
vsls
j
j---.----------!----!---f--------------------
~~utonobllns '
icsra.1~
~Chemlcals
1t:BX)j
54.48 1 31 53 ' 5 82
17.79): 1 4:51)i 10183)
!
1
~fi:if)i 0:0 i i,%X::l)j

/
214.71 / 91.25
6.04
19.46)i ( 4.02)/ 10.27)
1
!Drugs
i
11
i9.ooi
18.27lj
i2.97i 2.11
5.64)j 10.82)
tll:E)jtf;di"
11.23)
/
j (24:ss)j 162:32)~(100) j 13
11.33) j
! 463.62 jliiI4.25 12269.87 j 38
I
/ 120.42): 165.831~11001 : 13.80) j
j; 118.04):
41.46i154.24izza.78j12
i
I67.13)jllOOl
(1.231 /
' 171 66 ' 435 72 ' 699.21
j: 278.39
j 205.67 i 21.34 j 471.94 11576.70 i2554.04 j193
110.90); 8.05): 10.84) ; 118.46)j 161.731/1100) , 119.8211
i
j~nglneerins j 166.60 j 108.69 j 8.16 1 597.91 j143a.00 i2317.36 j 85
17.191: 1 4.601; 10.35) ; 125.801; (62.05)/(100)
1 8.731:
!Electronics
60.19 1 54.54 1 5.40 1 168.86 1 245.51 I 534.50 / 35

'
111.26)/ 110.20)j 11.01) j 131.59)/ 145.93)/(100) , 13.591/
Food
Class
!Hotel
inechanlcal
0.00
0.73 j 0.00
123.32): -
58.46 / 33.04 /
1 8 . 9 1 110691
0.00
0.00
-
0.59 j
,1100 1 :
0.00
-
34.77 1 182.84 1 309.11

111.25)j 159.151jI100)
2.40
, 176.68):
j 0.00
0.00 1 3.13
j(lOO1
0.00
-
1 0.59
!(loo)
2
1
10.21)i
7
1
0.72)j
1
1
slo.lo)j
9.83 1
2.40 ' 132.10 1 389.50 1 817.48 j 21
1
1 (34.70)j 1 1.201/ 10.291j (16.161j (47.65)jlLOOl
I 1 2.161I
Uedical
1 283.65 I
Ineta1
i966.26
139.38 / 4.40 /1711.42j5744.50/8565.96j 36
1 (11.28): ( 1.63); (0.051 j 119.981, (67.06)jIlOOl
13.701j
:Paper
!Photo
j~~ast~c
I
1
87.601 152.91
3120149232\1513.17/2287.20j 9
14.27): I 6.691; (1:36)! 121:53)/ (66.16ljl100) ; 1 0.921:
O.OO/
9.62:. 0.OOj
5 . 8 3 : 2.531 17.98j
153.501:
- , 132.421: l14.071j1l00) 4
72.68
139.041 2.45
16.40)j 112.25): 10.221
4
ij
13
j
( 1.33)m
257.77 662.88 i1134.92 i 69

122.71): 158.421jllOO) 1 1 7.081:
jPrintlng
'
:Rubber
i/
1 70 ' 83 77 ' 0 00 1 62 16 ' 17.00 1 164.63 j 126

1
(1:03)j 150:88)! :
1 137:761j 110.33l/l100) ; 112.84)j
21.56
21,81
8.12
56.01 / 215.20 / 322.70
11
1
16.68lj 1 6.76)j 12.52) / 117.361/ (66.69)/1100)
1 1.13lj
;Textiles
1'
4 4 6 4 ; 55.34/ 1.00 ~ 1 4 0 . 4 9 ~ 3 7 0 1 8 : 6 1 1 . 6 33
3~
1
17:30)j 18.05)j 10.16) : 122.97): 160:52)jl100)
13.381j
'
i
j,
1
1
jn~sce~lannousj108.42
260.48 / 25.08
367.80
a00.5~/1562.30 90
16.84)j 116.67): (1.61) j 123.54)j 151.241~11001 1 19.24)1
j~ot ldentttieb
0.00
'
0.00
-:-:I
0.00
\,
0.00
\
I
0.00
-
0.00
/168
!
1(17,25) j
!-
ii428.51 / 123.52 is201.93 ~t5301.2li24505.11./ 974'

I 110.00)j ( 5.83); 10.50)/ 121.23)j 182.44ljllOO) a 1100
I
I
L
L
'
L
:
/
T O ~ ~ I i2449.94
' ~ ; ; e ~ ~ r , ~ : , ~ P ; t c ;;pt;~tf;d~;b;;v~;t;;;{~~;:n~;(I;08
;~o~~bo~~;
( A go1 Or anlsatlonl, Neu Delhl
Flpuran in ~lrrntR*sss denotr pnrosnta&s.
(874-188)
concentrated more on investments on non-repatriation basis

in Plastic, Paper, Metal, Engineering
and Electronic
industries which record nearly 10 per cent each of the total

investments.
NRI equity participation in the project cost of
Mechanical, Photo, and printing industries account for 100
per cent, 53.50 per cent, and 50.88 per cent respectively
and their contrihution to industries like Food, Class,
Mechanical, Photo, and Printing is comparatively less.
In
all other industries the contribution of NRIs forms a very

insignificant portion of the capital employed, and these
industries depend mainly on the borrowed capital.
However,
on an aggregate, the average NRI investment in industries

over the period account
repatriation
for Rs.122.49 millions on
basis, and Rs.71.43 millions on non-
repatriation basis.
It records 10 per cent nnd 5.R3
per
cent respectively on total project costs over the period in

industries as referred tp in table IV.5.
The table further reveals that, on an aggregate,
the average investment by way of loan accounts for Rs.765.06
millions. The average residents' investment records
Rs.260.10 millions, which marks 62.44 per cent and 21.23 per
cent, respectively whereas, the foreign investment accounts
for an average amount of Rs.0.5 millions in the approved
projects over the period.
On the other hand, the approved
projects record 48.7 projects per category of industries.

This reveals that the NRI investment in industries is more
on repatriation basis than on non-repatriation basis as a

whole. The NRIs prefer to invest more,in Metal, Medical and
Electronic industries only on repatriation basis, whereas,
on non-repatriation basis they prefer to invest in
Electronic, Paper, Plastic and Mechanical Industries.
Industry-wise Trend of NRI Investments During 1984-1989

(Rs, in Millions)
Particulars
Number of Approvals (in Number)
974.00
48.7
54.94
112.82
liepatriation
ment
ment
I
IForeign Investment 123.52
Investment by
Residents
l~oanAmount
Project Cost
5201.93
)15301.21
24505.11
1
1
6.18
260.10
765.06
1225.26
8.84
382.16
143.17
146.93
1266.80
165.58
1890.29
-1
154.28
Source: Computed Results from the compiled data.
This may be due to the fact that most of the NRIs

who are settled in developed countries are professionals,
like Doctors and Executives, and they may
desire
establishing industries in India in thefs awn special fields

and getting back the money invested whenever they need. So,
the NRIs may prefer to invest in Metal, Medical and
Electronic industries in India on repatriation basis.
The
NRIs in the Middle East countries are mostly employees,

Technicians and Engineers, and there is no provision of
getting citizenship in their country of residence, and
hence, they may desire establishing and developing
industries in India in their own specialisation.
So, the
NRIs may prefer to invest in Electronic, and Mechanical

industries on non-repatriation basis.
State-wise Status of NRI Projects

Table IV.6 reveals the structure of the State-wise
status of NRI projects approved, projects under production,
projects under implementation, projects abandoned, projects
uninitiated and projects without any information. It can be
seen from the table that out of the total NRI projects
approved, 10.57 per cent are under production.
While 36.04
per cent of the approved projects are under implementation,

the abandoned cases record a percentage mark of 2.98 (29
cases).
The projects on which no steps were taken, after
approval, record 2.16 per cent, whereas, the projects on
which no information is availbale works out Lo 31 per cent

(302 cases).
It is inferred that though there is a sizeable
number of projects approved, 168 cases are not identified

due to lack of information from reliablw sources.
The table shows that out of the total approved
projects, the state of Maharashtra has the highest share at
15.81 per Cent (154 cases), followed by Delhi at 15.09 per
cent (147 cases).
Bihar and Jammu and Kashmir have shared
equally the lowest percentage marks of 0.10 each (one case

each).
On seeing the projects under production, the state
of Karnataka leads first scoring 25.93 per cent of its

approved projects followed by Madhya Pradesh (25 per cent),
Gujarat (23.44 per cent), Punjab (23.07 per cent), West
Bengal (22.22 per cent), and Tamil Nadu (21.05 per cent).
However, the projects under implementation shows that the
state of Haryana is implementing more approved projects
(76.19 per cent) followed by Andhra Pradesh (66.67 per
cent), Orissa (62.5 per cent), Rajasthan (58.82 per cent),
Goa, and Uttar Pradesh (57.14 per cent each).
,In terms of percentages, the abandoned cases are
more in Pondicherry (25 %) followed by Orissa and Gujarat
(12.5 per cent and 10.94 per cent respectively).
Cases
where steps have not been taken after approval are more in
Punjab (30.77 $), followed by Pondicherry (25 per cent).
On
the other hand, projects with no information after approval
TABLE IV.6
Stat*-WiSm Status Of NRI Projaots Approvad During 1904-1868
I
State
IAndhra rraassn
I Unamr I Unaor :ADsndI Produo-'In lemon

I
talon o n
:NO teprINo Inlori TO a1 :

j taten '-nation IAppr:vais/
i - i ~ i - / - \ ~ / ~ ~ /
1 (1.33)
1
1
:
I
I
1(100)1
i~adraL Nagar
/Have11
ik
/
i
j;
1Delh1
1 1 5
I 4 6
j
j (10.20)/ (31.29):
1
1
1Goa
I
I
/Gujarat
1 1 5
' 2 7
1 7
'
/ (23.44): (42.19)j (10.94)i
jHaryana
~Blhar
(20)
(66.67)j (1.33); (2.67) ;
3
(60)
-o
1;
,-
3
1 3 2
'
7.14): (76.191j
/Hlmachal ~radesh: 0
-
IJammubKashmlr/
1 4
0
1(57.14)!
1
/
: (100)
1
(20)
j;
(100)
1
5
110D)
1
' 8 5 ' 1 4 7 :
LO.68)j (57.82)i (LOO) j
0
1
3
1
7
:(42.86)j(lOO)
2
13
'
64
(3.12)j (20.31)j (100)
1
'
(2.381i
1 6 ' 4 2
I 114.29)i (100)
1
I
iI
'
I
I
'
1
I
1 ~ 1 0 0 ) ; ~ 1 0 0 )j
1
151
0'
(44.44);
(28)
5
9
(55.56)j (100)
IKarnataka
jKerals
1MadhymPradosh
IMaharashtra
1Orissa
:
1
5
1
1 (12.5) j (62.5) j (12.5)
jPondlchorry
5
1(25)
11
j 155)
26
' 70
I 12
'
(16.88); (45.45): (7.79)i
1
1
I 125)
(25)
3
1
20
(15) j (100)
8
1
38
' 154
(5.19); (24.68)\ (100)
(12.5)
8
(100)
1
(25)
1
(25)
4
(100)
/
1
IPunjab
IRa jasthan
~~smllNadu
1UttarPradesh
i~sstBmnga1
8
j 1 5
1
1
1 1 3
/ 38
1 (21.05)j (39.47); (2.63)/ (2.63): (34.2111 (100)
I
0
1
24
'
70
j
5
j 40
j 1
1 (34.29)j (100)
, ( 7.14): 157.14); (1.43)j -
Total
Souroa> Compl\ad from th8 records of the Indian

Cantrm ( A GO1 Otganlsatlon), NOW Dolhl.
Fl#uras ln ~a;anthosas dmnota pmrcantrges.
125
Invsstsent
!
j
are more in Delhi (57.82 8 ) ; the corresponding figures for

the states of Himachal Pradesh, Jammu and Kashmir are 55.56
per cent, and 100 per cent respectively.
The projects with
no information record about 35 to 40 per cent each for the

states of Coa, Karnataka, Kerala, Tamil Nadu, Uttar Pradesh,
and West Bengal.
It is inferred from the table IV.7 that the
average approval of the projects per state over the period
records 44.27, whereas, the average projects under
implementation accounts for 15.95.
While the average
projects under production record 4.68, the abandoned cases

are 1.32.
On the other hand, the average projects under
'taken-no-steps' after approval come to one for each state.

The average projects with 'no information after approval'
come to 21.3fi over the period.
It reveals that getting
approval does not mean that the industries have been

started; it means just getting approval for starting
industries. Here it is seen that while the average projects
under production are only 4.68, the average projects with
'no information' record for 21.36 for the states over the
period.
Though the analysis brings different results, it
is obvious that the State of Maharashtra leads in all types
projects approved, projects under production, and projects
under implementation.
This may be mainly due to easy
availnbility of rnw-mnlrrinls, inlrnstrucl~~rnliucilillcs,

climatic conditions and the State Government's special
interest and initiative in attracting more NRI projects in
the state in addition to the Covprnment policy and
simplification of procedures made to woo more NRIs to set up
industries in the state.
State-rise Trend of Approved

Projects for NRIs During 1984-1989
Particulars
Projects Average
Standard Co-effici
Deviations -dent of
variation
--
Total Approvals
(in Number)
974
44.27
50.08
113.11
Under Production
103
4.68
6.70
143.19
Under Implementation
351
15.95
19.28
120.87
Abandoned
29
1.32
2.75
208.87
No Steps taken
21
0.95
1.82
190.77
470
21.36
37.68
176.40
No Information
--
The repatriation of capital invested and the

income earned thereon to the extent of 40 per cent of the
total paid up capital of the project and the incentives for
import of capital goods, componrnts nnd r n w mntrrlnls for

setting up industrial units might have also influenced the
NRIs in setting up projects in the state and in the country
as a whole.
State-wise NRI Investment in Industries

In the following paragraphs the state-wise NRI
investment in industries has been analysed and the details
are presented in table IV.8.
The table reveals that the
NRls' contribution to industries on repatriation basis

accounts for 10 per cent of the total project cost, whereas,
on non-repatriation basis its share is only 5.83 per cent.
The foreigners, and residents of India have shared of 0.5
per cent and 21.23 per cent respectively of the total
project cost.
In respect of state-wise progress, the NRI
investment in industries on repatriation basis is more in

the States of Haryana, Karnataka. Gujarat and Goa with
percentage marks of 15, 14.23, 12.13 and 13.77 respectively.
On the other hand, the overall progress shows that
Maharashtra has benefited much from the NRI contribution at
a mark of Rs.1004.51 millions for the period.
In the light of the analysis, it is found that the
NRI investment on non-repatriation basis is more in the
state of Maharashtra at a mark of Rs.444.55 millions.
However, it is clear in the table that the NRI investment is
TABLE IV.8
State-ulro NRI Invmatnrnt In Indurtrlra During 1984-1989
(Us. in Ullliona)
Investment
1----------_______._.--------------------*
state Name
IAndhraPraassh
jRepntrl-/Nan-Reps:
itlot?
;trlatloniForelgn j~esldenti Loan
1 Project j Number /
/: Cost ,/Approvals:
of
:
1-1
: i4;::y)\ ilz:iA1\ ('?:?;>\m\%
1 7.701 \
1
0.00 /
1.28 /
0.00 1
1 13.30 1
14.58 /
1
'
1
I 8.781;
- , 0.00
- 1(91.22)jllOOI
:IO.iOlj
j 13.20 j 7.40 1 0.00 i 27.60. 1 71.00 1 119.40 / 5
1
Bihar
iDadra L Nagar
:Have11
111.061j l6.201j
123.28); 159.461: (100)
IO.511
i~elhl
I 96.34 j 159.93 j
0.74 ! 145.06 \ 64.63 j 469.47 '; 147
1 120.521: 134.071: I 0.001: 130.901/ 115.771; 11001
: (15,091 I/
1Goa
Sujarat
11
:HaryanP
4.69: 6.96 j
1 (13.771j (20.431:
0.00
391.16
93.87
112.131: 12.92):
10.47 / 11.94 1
34.06 /
130.74); (35.081: (1001 ;
7
1
0.721 1
7.02 635.85 j2095.85 3223.75 j 64

0.221: (19.72): (65.011: I1001
, (6.57) ;
:1 107.16
: 61.26 1
2.67 1 136.24 : 407.15 1 714.48 j 42
(l5.001/ I 8.571; 1 0.37lj (19.071j l56.99)/ I1001
, 1 4.31)
6.40 1 21.86 1
3.94
26.83 1 330.11 1 191.14 /
9
1
, l3.35lj 111.441j (2.061: (15.061: 68.071/ 1100) ; 10.921 1
I~imachs~
F'radesh;
Karnataka
/1
lKetala
hadhya Prsdesh
92.00 1 56.26 1
: 19.77): (5.471:
0.00
-
:lammu & Kashmlr
0.00
1.50 1
7.50 1
10.50 j
1
1
, 114.29); 171.421; 1100) ; I 0.10) /
1.50
(14.291,
128.85 1 68.20 1
3.41 / 236.57 1 468.22 1 905.25 /
(14.231j ( 7.54): 1 0.381; (26.13): (51.72); (1001 ;
0.00
-
:
:
11.77 1
0.02 1 15.74 1
8.89 1
38.42
(32.321: ( 0.051j (43.221; (24.411: I1001
0.00
18
/
1.851 i
20
1
( 2.05) j
182.04 1 611.49 ' 941.81 /

, (19.33lj (64,9311 (1001 ;
54
1
5.541 j
naharashtra
j1004.51 / 444.55 i 13.39 11964.48 /5816.29 / 9263.22 154

1
1 110.851/ 1 4.801/ I 0.14): (21.42); (62.791: (1001 ; (15.81) j
Oti8sa
/1
'
'
33 00 376.60 /1016.87 : 1456.27 i

8
j (0.82)
( 2:2711 125.86lj t69.821j (100)
17 20
12.60
l1:18lj 10.871;
I
Pandlcherry
Punjab
41 63 '
0 91 '
(10:291j (0125):
3.92 1 39.03 1
j
/
1
Rajasthan
~amii Nadu
j,
0.00 j
0.00
22.60 /
I3.321j
60 15 ' 285 97 ' 368.68 '

(16:32)[ (72:14)j (1001
84.52 1 216.50 1 343.97 j
, 124.57)j 162.941: 11001 :
62.27 1
1.68 1 148.09 1 446.97 1 681.61
( 9.141j 10.24)/ (21.731/ (65.57): (100)
!:
2 97 : 119 57 ' 276 99 ' 574 22 j

/, 129
40 : 45 29 1
122:53)\ I 7:891\ 0:52)\ 120:821\148:241j (100; /
:j 2P6
20
163 92 : 28 I3 575.25 j1960.58 1 2972.08 /
I 6:28)i
5:511; i 0:9511 119.291: l65.97)j (100) j
(
u t t a r Prade'h
0.00
Not lndlcatad
/!
0.00
/j(ior~.ao~:
18.98
~ o Identlflod
t
0.00
j,
:Vest Bengal
(
(
A.41)
13
1.33)
1j
{
'
17
1
( 1.75) j
I 3.90)
38
70
7.191
37 18 :
0.60
37.15 1 148.00 ! 223.13 1
9
1
t16.671j 10.361/ (16.641; 166.33): 1100) I (0.92) /
0.00
[,
0.00
,
0.00
0.00
j,
0.00
0.00
0.00
P i ~ r ein parenthesea denote percentages.

129
j
- j,
'
50
1
- j. ( ~18.98
o Q ) j(s.t3)j
i
0.00 / 188
- I - 1(17.25)11
at a higher rate in New Delhi, Goa, and Kernla with

percentages of 34.07, 20.43, and 32.32 respectively.
The
foreign investment in the approved projects is at a higher

rate only in the state of Orissa follpwed by Uttar Pradesh.
The residents of India have shared the contribution almost
equally in Delhi and Goa, whereas, their share in Gujarat
and Haryana is also almost equal at percentage marks of
19.72 and 19.07 respectively.
However, the state of
Maharashtra has benefited more from residents also at an

amount of Rs. 1984.48 millions (21.42%).
The table further reveals that the loan amount has
a major share in starting projects irrespective of the
states.
Every state has benefited much from the loan
amount, and the state of Bihar has received the highest rate
of 91.22 per cent.
The cost of the projects differs from
State to State, and of all the States it is the highest in

the State of Maharashtra at an amount of Rs.9263.22 millions
for the period.
These differences may be due to easy
availability of raw-material, climatic conditions,

infrastructural facilities and the Government policies
toward the NRI projects.
While the average NRI investment
on repatriation basis for the industries accounts for

Rs.111.36 millions, the investment on non-repatriation basis
accounts for only Rs. 64.93 millions for the period (table
IV.9).
The average foreign investment records Rs.5.61
millions.
The residents' average investment in these
industries records Rs.236.45 millions for the States.

However, the average loan amount, being Rs.695.51 millions,
has a higher share in starting industries in India
irrespective of the States.
The avePtrge projects approved
account for 44.27 per State over the period.
TABLE 1V.B
State-rise Trend of NRI
Investment in Industries During 1984-1989
(
Particulars
Repatriable NRI
Investment
Non-repatriable
NRI Investment
Foreign
Investment
Resident
Investment
Invest
ment
2449.94
1428.51
123.52
5261.93
Standard Co-effici
Deviations -cient of
variation
Average
(
/
111.36
64.93
5.61
236.45
Rs, in Millions)
(
1
217.02
95.59
9.54
422.15
1
/
194.88
147.22
169.95
178.53
Loan Amount
Number of Approa
i n numbers
I 1 1
44.27
50.08
--
113.11
As observed already the foreign investment is at a

higher percentage on rubber industries (vide table IV.4),
and the residents' investment is higher on metal industries.
The projects have been started mainly-with the loan amount,
and it is found that the highest amount of loan was taken
only for starting metal industries. So, it can be concluded
that the metal industry is the key
industry, in the
estabilishment and development of which the NRIs and the

residents of India are interested. The reasons
attributed
are easy availability of raw materials,
climatic
conditions, cheap rate of labour, higher marketnbility, etc.
Region-wise NRI Investment in Industries

Region-wise trend of NRI investment in industries
is presented in table IV.lO.
The table clearly shows that
30.18 per cent of the total proposals were made by NRIs

residing in
the total
USA
and Canada, whereas, only 1.54 per cent of
proposals by those who reside in Far East Asia.
The average proposals to different regions ranges 115 during

the period.
Though the Far East Asia has only a meagre
amount of share in the total proposals approved for

projects, its share of contribution to the
approved
projects on repatriation basis is higher at 12.46 per cent;

all dther regions have below ten per cent share except the
USA and Canada and the South East Asia which have a little
more than 10 per cent share of the total project cost.
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However, on-non repatriation basis, the NRIs from Middle

East countries have the major share, and the NRIs from the
Far East Asian countries have a small share of 2.92 per cent
of the project costs.
The foreign investment in industries in India, has
a very meagre share, not even touching one per cent mark of
the project cost irrespective of the region.
On the
otherhand, the residents' investment is about 28 per cent

for the NRI projects from Europe.
For all other regions,
the share of residents' investment is more or less about 20

per cent of the project costs.
However, it is evident from
the table that the loan amount has a major role in

establishing
industries in India irrespective of NRI
projects fron, all the regions.
Its role is about 66 per
cent for the NRI projects from the UK, and about 64 per cent
for the NRI projects from the South East Asia.
For other
NRI projects from other regions, its role is about 55 to 65

per cent.
It is clcar from the tablc IV.ll that thc avcragc
NRI investment in projects on repatriation basis accounts
for Rs.306.24 millions, whereas, the average NRI investment
on non-repatriation basis accounts for only Rs.178.56
millions.
The average pure foreign investment and
investment by the residents of India amount to Rs.15.44

millions and Rs.650.24 millions respectively.
The average
loan amount for the projects accounts for Rs.1912.135

millions, and the project cost per region records an amount
of Rs.3063.14 millions over the period.
So, 11 can be seen
that in respect of NRI investment in -industries, the share

of investment on repatriation basis is higher.
TABLE I V . l l
Region-rise Trend oi NRI

Investment in Industries During 1984-1989
(Rs. in Millions)
Particulars
Invest
ment
Average
Standard Co-effici
Deviations -cient of
variation
-Repatriable NRI
Investment
2449.94
306.24
361.36
118.00
Non-repatriable
NRI Investment
1428.51
178.56
179.09
100.30
Foreign
Investment
123.52
15.44
20.86
135.13
Resident
Investment
5201.93
650.24
721.07
110.89
Loan Amount
15301.21
1912.65
2381.71
124.52
Project Cost
24505.11
3063.14
3629.10
118.48
121.75
92.49
75.97
Number of Approvals (in numbers)
974
--

On the otherhand, the residents' share of
investment in the projects in India is higher than the
foreign investment in the industries; however, the loan

amount has played a major role in establishing NRI projects
in India irrespective of their country of residence.
In
addition, the UK has the higher project cost of Rs.10497.56

millions and Far East Asia has the lower project cost of
Rs.309.11 millions.
This may be due to the economic
conditions, level of cducation, knowledge about the most

advanced technologies and the interest and initiative of the
individual NLlIs who rcsidc outside India in addition to the
liberalization policies and simplification of procedures in
India.
TEWD OF NRI PORTPOLIOS-1
Introduction
The previous chapter dealt with the NRI interest

in direct investment schemes.
It highlighted the N R I
participation in the setting up of projects in India, direct

subscription to several schemes, their contribution to key
industrial sectors, etc.
The analyses are also made in
respect of industry-wise and state-wise status of N R I

projects approval, investment, region-wise trend of N R I
investment in industries, etc.
In this chapter an attempt
has been made to study the trend of N R I portfolio

investments adopting appropriate tools.
This chapter is also divided into two parts: 'Part

A ' and 'Part
B'. While the former deals with N R I investment
in shares and debentures, the latter discusses the N R I

investment in company deposits, units of U T I , etc.
PART
-A
Investment in Shares and Debentures

The Indian capital market provides a significant
opportunity to NRIs to invest their funds in corporate
securities.
Portfolio investment, i.e., investment in
shares/debentures of companies through recognised stock

exchange, by NRIs is permitted only through designated
branches of authorised dealers. The rate at which portfolio
investment has also grown has resulted in the fact that the
quota of most new public issues reserved for NRIs has been
oversubscribed.
Portfolio analysis begins when a portfolio
investor has the expected Holding Period Return (HRP) and
risk statistics for the various bonds, stocks, and other
assets under consideration for inclusion in the portfolio.
A simple way to select assets worthy of investment is to use
the dominance principle.
It states that among all
investments wit11 a givcn expect;ed 1IP11, the onc wit11 the
least risk is the most desirable, and conversely, among all

investments in a given risk class, the one with the highest
HPR is the most desirable.
Bepatriable Portfolio Investment

Table V.l is constructed mainly for the purpose of
analysing the portfolio investment made by NRIs.
It is
Portfolio Investment by N l l l s
(Actual Purchase of Shares and Debentures)
[ I ~ H11
,1 < : l ' ~ l l ' ! ~ U )
Year ending
31st March
Repatriable
2
22 .!)I
19R2-83
Non-repatriable
Total
0.01
(2+3)
2 % .9%
l00.1t~1)
lO.Il1~
1983-84
40.43
(99.39)
0.25
(0.61)
40.68
1984-R5
46.57
[il!I.:ltl)
0.30
(1l.Il-I)
4f3.87
1985-86
55.40
(98.70)
0.73
(1.30)
56.13
19R(i-87
5R.OR
(!It{,
:I!))
0.95
59.03
(1 .Ill)
64.97
(97.73)
1.51
(2.27)
66.48
1.75
77.71
1987-88
7n.o~
1rWu-Rn
(!I / 39)
(2.41)
Source (i) Jay Narayan Vyas, NRI Investment Policy and

procedures, A Ready Reckoner, Saket
Cnmmllni rntlon Crntrr, Ahrmnrlnhnrl, p. 2, nnrl
(ii) Compiled from the Annual Reports of the
Indian Investment Centre, New Delhi.

Note: (i) Figures are cumulative
(ii)
-
t'lgures in parenltlescs are perccoLages Lo

total.
clear from the table that though there are facilities for
both repatriation and non-repatriation, NRIs prefer to
invest only in repatriable rather than non-repatriable
schemes. The portfolio investment on-repatriation basis was
nearly the centum at a percentage mark of 99.96 in the year
1983.
It can be witnessed from the table that a sum of
Rs.22.91 crores is invested in the scheme during the year

1982-83 which accounts for 99.96 per cent of the total
portfolio investments.
The
corresponding figures for the
year 1988-89 is Rs. 70.99 crores recording 97.59 per cent.

Though there is a three-fold increase in terms of investment
for the period of seven years, the proportion between
repatriation and non-repatriation has been maintained at the
same level.
It is further seen from the table that the NRI

interest in the scheme has grown at a rate of 24.7 per cent
at the end of March, 1986, whereas, the same has grown at
6.39 per cent from 1986-89. Though the NRI interest has not
declined in the scheme, the overall growth rate shows a poor
growth of 17.53 per cent for the study period recording an
average flow of investment of Rs.51.33 crores per annum.
It can be seen from the table V.2 that the trend
equation fitted for the purpose shows that.the growth rate
for the scheme is encouraging ('b' value 7.3153).
The
increasing trend of the scheme ( ' R ~ ' value 0.9460) shows

that the growth rate is found statistically significant as
the
computed
significance.
't' value
is 9.36 at
5 per cent level of
The reasons for th8 higher value of the
computed trend may be due to the liberalization policies of

the Central and State Governments on the rules, procedures
and other formalities in addition to the facilities of easy
transfer and taxation relief.
Non-Repatriation Portfolio Investment

It is seen from the analysis (vide table V.l) that
the share of portfolio investment on non-repatriation basis
is very meagre.
In the initial period, this scheme accounts
for only 0.04 per cent of the total portfolio investments

and its share increased to 2.41 per cent during the year
1988-89.
The NRI interest in the scheme in the initial
period shows a higher growth rate of 92.3 per cent, whereas,

for the later period, it has only 24.43 per cent growth.
However, the overall growth rate of the scheme for the
period shows that there is a sizeable growth (109.14 per
cent) recording an average investment flow of Rs. 0.7857
crores per annum.
The trend equation analysis (vide table V.2) shows
that the growth rate for the scheme is found statistically
significant as proved by the computed 't' value of 11.49
when the growth rate ('b' value) and consistency ('R2'

value) are worked out to 0.2996 and 0.9635 respectively.
The higher value of the computed trend may be due to the
liberalization policy of the GO1 towards the NRI investment
in the past half a decade.
Further, it is observed from the analysis (vide
table V.l) that the total portfolio investment (clubbing
both repatriable and non-repatriable schemes) is increasing
at a higher rate.
The growth rate of the scheme shows that
there is a sizeable growth at 25.1 per cent for the period

upto 1986.
But the growth rate for the schemes for the
remaining period, upto 1989, is only 6.7 per cent.
However,
it is clear from the analysis that the growth rate of the

schemes for the overall period is 17.94 per cent recording
an average flow of investment of Rs.52.14 crores.
The trend equation fitted for the purpose also
shows (vide table V.2) that the growth of NRI investment in
these schemes is welcome as referred by the computed ' b '
value of 7.615.
It is clear that the investment in these
schemes has positively increased, and the consistency ('R2

value 0.9516) and the growth rate ('t' value 9.91) is found
statistically significant at 5 per cent level.
The capital issues to NRIs by the Indian Joint

Stock Companies include the 'initial issues', 'further
issues', 'bonus issues', 'debenture issues', 'loans', etc.

The progress of capital issue of the Indian Joint Stock
companies to NRIs is shown in table V.3.
It is evident from
the table that the capital issues to W I s by way of 'initial

issues' account for higher growth rate at 48.24 per cent.
The lower amount of growth is due to the 'debenture issue'
recording 3.42 per cent growth rate for the study period.
The average capital issues account for Rs.23.91
crores and Rs.12.9 crores for the 'initial issues' and
'further issues' respectively for the period.
It accounts
for Rs. 30.21 crores and Rs.9.94 crores for the 'bonus
issues' and 'debenture issues' respectively.
The average
'loan' contribution accounts for 68.24 per cent for the

period of the study.
'Further issues' have grown at a rate of 41.8 per
cent over the period, whereas
per cent.
the 'bonus issues'
at 18.3
The 'loans etc' have grown at 10.94 per cent
while the total capital issues to NRIs by the Indian Joint

Stock Companies have grown at a rate of 20.67 per cent over
the period of the study.
The analysis further reveals that
the major share of capital issues is that of the 'bonus

issues', though there are different types of issues to NRIs.
To'understand better the trend and progress of the
capital issues of the Indian Joint Stock companies to NRIs,
a linear trend equation is fitted for each case and the
results are presented in table V.4.
the table that the increasing trend of the total capital

issues by the Indian Joint Stock companies ('b' value
731.10) shows that the consistency t1R2' value 0.8174) and
the growth rate are found to be statistically significant

(computed 't' value 5.60).
A
trend equation is fitted for the purpose of
knowing the level of significance of the NHI contribution to

Indian Joint Stock Companies by way of capital issues.
Though the
NRI
share
in the capital issues of the Indian
Joint Stock Companies has registered an enormous growth the

growth rate is found to be low (insignificant) as proved by
The analysis further
reveals that the capital issues to NRIs in the form of

'initial issues' alone account for Rs.23.91 crores as an
average per annum.
The overall growth rate shows that the
'initial issues' have been growing at a rate of 48.24 per

cent. However, the trend equation analysis reveals that the
growth rate is proved statistically insignificant as the
computed 't' value is only 1.57 at 5 per cent level of
significance.
It is understood from the analysis that the
capital issues to NRIs by way of 'further issues' have grown
at 41.8 per cent recording an average capital issue of about
Rs.12.95 crores annually.
Though the consistency ('R2
value 0.5168) is found reasonable, the growth rate for the
capital issue to NRIs as 'further issues' is found

statistically significant (computed 't' value 2.74).
The
capital issue to NRIs by the Indian Joint Stock Companies in

the form of 'bonus issues' has succeded in its objective to
the level of 18.3 per cent growth rate over the period,
recording an average inflow of investment of Rs.30.21 crores
per annum.
Though, according to the trend equation
analysis, the progress of the 'bonus issues' to NRIs is

found statistically significant (computed 't' value 2.34),
the consistency with time is found low as proved by the
calculated 'R"
value of 0.4397.
The growth rate for the capital issues to NRIs in

the form of 'debenture issues' is found statistically
insignificant having least relationship with time as one of
the bivariate; it has grown at a rate of 2.9 per cent only
for the period.
Though the Indian Joint Stock Companies
consider NRIs as the potential investors, they have

miserably
failed 4 n tapping the resour.ces from the
debenture issue.
It is quite evident that the NRIs evince
keen interest in contributing towards the equity base of the

companies, but their response towards the debenture capital
is not that much encouraging.
And
in fine, the growth
rate of
the NRI
contribution in the Indian Joint Stock Companies in the form

of 'loan' is aleo found statistically insignificant as
proved by the computed 't' value having an average flow of
investment potential of Rs.68.24 crores annually over the

period.
It can be concluded that the growth of the share of
NRIs in the capital issues of Indian Joint Stock Companies

is high, though the share is statistically low. It is also
hoped from the analysis that the share of NRIs' in the
Indian captial market will be even higher in the years to
come.
-B
PART
Other Investment by NHIs

Besides investing in shares and debentures of
Joint Stock companies, NRIs show a considerable interest in
investing their funds in units of UTI, Government Bonds, and
other investment schemes like NSS, NSC, etc.
Of late, a
considerable number of them invest in company deposits also.

An attempt has been made in this part of the chapter to
discuss the NRI response towards these investment schemes.
Investment in Company Deposits

Year-wise progress of NRI investment in company
deposits is presented in table V.5.
the table that though the scheme of company deposit

investment was introduced only in 1983, it has achieved
growth at an enormous rate.
The NRI investment in company
deposits on repatriation basis has grown at a rate of 40.13

per cent over the period, whereas the NRI investment in
TABLE V.5
NRI Investment in Company Deposits
(Rs.in Crores)
Year ending
31st March
Repatriable
Non-repatriable
Total
(2+3)
Source:
Compiled from the Reports of the Indian

Investment Centre, New Delhi.
Note:
Figures in parentheses are percentages to

total.
company deposits on non-repatriation basis has grown at a

rate of 10.27 per cent only for the same period. However,
the overall growth rate for the total (clubbing together
both the repatriable and the non-repatriable) company
deposit shows that there is an encouraging trend in the
scheme; as it has grown to the extent of 26.02 per cent over
the period.
It can also be observed from the table that the
NRI share in the scheme on non-repatriation basis is high in

the initial years of the scheme.
In 1984-85, an amount of
58.98 per cent of the company deposits were made on nonrepatriation basis; though the deposits on non-repatriation
basis have increased from Rs. 5.09 crores in 1984-85 to
Rs.8.3 crores in 1988-89, the proportion of deposits has
declined to 30.26 per cent.
However, the deposits made on
repatriation basis have registered a higher rate: it was

only Rs. 3.54 crores in 1984-85, which accounts for 41.02
per cent of the total company deposits, and it increased to
Rs. 19.13 crores in 1988-89. It is seen that the deposits on
repatriation basis have grown almost five fold during half a
decade and the record is 69.74 per cent of the total company
deposits during the year 1988-89. So, it can be concluded
that the NRI interest has turned towards depositson
repatriation basis, as against the overwhelming response to
non-repatriation-basis-company-deposits in the initial years
of the scheme.
To understand better the trend of NRI investment
in company deposits, a linear trend equation is fitted for
each case, worked out, and is presented in table V.6.
It is
inferred from the table that the NRI investment in company

deposits has grown at 40.13 per cent for the period,
recording an'average investment inflow of Rs. 12.9 crores on
repatriation basis.
The trend equation analysis reveals
that the growth rate of the NRI interest in the scheme on
repatriation basis is found statistically si~nificnntas the

computed 't' value is 3.32 at 5 per cent level, when the
'R2' value works out to 0.7857.
The table further reveals that the NRI investment
in company deposit on non-repatriation basis has grown at a
rate of 10.27 per cent over the period recording an average
flow of investment of Rs. 6.83 crores.
As it is witnessed
by the computed 't' value of 4.26, the growth rate for the
scheme is found statistically significant at 5 per cent
level of significance, when the consistency is considerable
('R2' value 0.8580).
Though the NRI investment in company deposits on
repatriation basis has grown at 40.13 per cent over the
period, the overall growth rate (clubbing together both the
repatriable and the non-repatriable) of the scheme shows
that the investment has grown to the extent of 26.02 per
cent only.
However, the trend equation analysis shows that
there is a sizeable rate of growth ('b' value 5.47), and

consistency ( ' R ~ 'value0.7859), and, thereby, it is found
that the success of
the growth in the scheme
is
statistically significant as evidenced by the computed 't'

value of 3.32 at 5 per cent level of probability.
The main reasons for the enormous growth of the
NRI investment in company deposits may be the enhanced

interest rate offered to this type of deposits and the
liberalized policy adopted by the GOI. Another attraction

may be that the company deposits are secured against the
fixed assets of the company in order to compensate the loss
that might arise in case of any company failure.
In the
event of any company failure or dissolution, the NRIs

wouldn't have to lose a single rupee since the entire
deposit is secured. Further, the share of NRI investment in
company deposits is more on repatriable rather on than nonrepatriable basis since they feel that the repatriation
facility is more beneficial to them than the nonrepatriation one; an additional attraction is that an
exchange gain might arise in the event of the the
depreciated of the Indian rupee.
Like the bank deposits, the company deposits
may depend on the exchange rates of the dominant currencies
which have been permitted for investment in company
deposits.
In order to understand the relationship between
the NRI investment in company deposits and AER for
f,
simple correlation analysis has been attempted, and the

results are presented in table V.7. It is observed from the
table that there is a hiehly positive correlation between
the company deposits made by NRIs and the AER for f as shown
by the computed ' r ' value of 0.9844. The table also reveals
that there- is a positive correlation between the NRI
investment in company deposits and the AER for $ for the
period as evidenced by the computed 'r' value of 0.8987.
TABLE V.7
Correlation Co-efficient for

NRI Investment in Company Deposits and Interest
Rates on NRI Banh Deposits and E x c w g e Rates on $ and P
Correlation Co-efficent Between
Company Deposit and AIR on FCNR Account
II
0.1345
Company Deposit and AIR on NRER Account
0.1844
Company Deposit and AER for $
0.9844
Company Deposit and AER for
0.8987
!1
Correlation
Co-efficient
( ' r' Value)
Source : Computed Results from the Compiled data

Further, a simple correlation analysis has been
attempted to understand the dependency relationship between
the company deposits made by NRIs, and the AIR on NRER and
FCNR deposits.
The analysis reveals that there is a
positive correlation between the company deposits and the

AIR on NRER deposit as shown by the 'r' value of 0.1844.
However, there is a negative correlation (-0.1345) between
the company deposit and the AIR on FCNR deposit.
It can
therefore be concluded that there is a
positive correlation between the exchange rates and company
deposits. While there is a positive correlation between the

company deposit and the interest rate on NRER deposit, a
negative correlation is found between the company deposit
and the interest rate on FCNR deposit.
So, it can be said
that the NRI investment in company deposit is dependent on

the exchange rate of $ and
and the NRER interest rate, but
not on the interest rate of FCNR deposit.
NRI Investment in units of UTI
Scheme-wise Analysis
Though
there are several schemes for NRI
investment in units of UTI, the dominant schemes such as

'Unit scheme 1 9 6 4 ' ,
'Re-investment Plan', and 'Children's
Gift Plan' have been taken into account for the analysis.
The analyses are made on the basis of applications and the
investment by NRIs (sales and outstanding).
The scheme-wise
progress of NRI investment in units of UTI is presented in

table V.8.
It is understood from the table that out of ttre
applications sold to NRIs for the investment in units of UTI
in different schemes, those in the 'Re-investment Plan'are
greater in numbers.
It alone accounts for 863 (59.15 per
cent) in 1978-79 as against 2170 applications (53.73 per

cent) in 1987-88.
h i t k h l9M
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h
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Dildm'r Gifl l l m
lotd
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:
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: :standing1
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$1 I M : 8.5 : 751.80 1 1111 I II& 1 17.n 1 5l.t~i a 1 465 : 7.1s : 39.53 1 1801 1 s l i l I 96.11 818,iq
lR.ZAl1 107.121: Ill.10l~lM.Mi I 161.141: I1Ll11I IM.MI1 I d.13II 13.501 I 11.0711 11.111~14.0111 I00 I : IlW I 1 llWl : IlWl
JW I 9.55 : 31.71 I ie 1 w I 117,MI 1M.n :

18.5811 181.8511 180.1111191.101 1 157.141: 1ll.Hii 111.31I 14.1411 I1,bBI I l4.b 11 11,411 11,1b111 103 1 1 I1W I I ilWl : llWl I
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1 I l R I 101.261 101,zbI 1056 I IWI
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: IDI~DI: 1w.rni: I~U.~~I~IB.I~I
1 1u,b511113,501:III,KI: I U.%I: I~,OZI
: 15,311 16,4311I LNIKIIW I : ~ i wI : IIWI : IWI I
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iM.8lI 180.8111 172.131:185.151 1 1b1,5511 113,4311 115.bli1 19.111 1 11.1bl : l1.7kl1 I b.15I 15.11111 lW I I I IWI I IIWI I IlWl !
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: 18.19l1 In.111: l69.9111l81.431 1 lM.MlI 113.19I1 112.1911 111.M11 lb.9ll 1 16.791i I7.WI: lb.17111 I03 I I 1 IWI I IIWI 1 llWl
N : 108 1 9101 1 1w.wW

.II:
'
I 1443 j iol74 I n1.w l~uc.w;Is i
: 9r.w : na.w :
113.~11
In.rl: IR.III:I~I.~~II 19.0311 111.1611 119.7911 111.9111
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15.961: 11,101: 1 ~.RI:IIW I I I IWI I (lml I llml I
,
,
,
,
,
,
,
It can be seen from the table that out of the

different schemes available under UTI. NRI share is higher
in 'Unit Scheme 1964'. It has been maintained the NRI
investment in this scheme alone amounts to more than 80 per
cent level for all the years under study, except the year
1987-88 during which the share of NRI investment accounts
for 78.23 per cent only.
It is also observed that the NRI investment in
'Re-investment Plan' accounts for a meagre share of Rs.8.38
lakhs in 1978-79 to Rs.436 lakhs in 1987:88.
However, the
interest of the NRIs in the plan is picking as evidenced at

17.67 per cent in 1987-88 as against a very low share of
1.46 per cent in 1978-79.
NRI investment in the 'Children's Gift Plan'
accounts for a very low share.
However,, the investment
under the scheme is found to be growing.

From the analysis, as a whole, it can be concluded
that while the share of NRI investment is growing to a high
rate in the 'Unit Scheme 1964', the growth found in the 'Reinvestment Plan' and 'Children's Gift Plan' have been
progressing at a low rate.
Trend equation analyses are also attempted to
understand statistically the growth of NRI investment in
various schemes of units of UTI, and the results of the
analyses are given in table V.9.
It is inferred from the
table that the NRI interest in 'Unit Scheme 1964' has been
increasing at a rate of 19.9 per cent recording an annual
average investment inflow of Rs.189-5 lakhs.
However the
total progress of outstanding NRI investment in the scheme

is found to be growing at a rate of 13.4 per cent only. The
results of the trend equation, fitted for the purpose, show
that there is a sizeable consistency with time in the
interest of the NRIs in the scheme as shown by the ' R ~ '
value of 0.8238.
It is also found statistically
significant, as the computed 't' value is 6.12 at 5 per cent

level.
The table reveals that the share of NRI in the

'Re-investment Plan' has also been increasing at an enormous
rate of 48.5 per cent recording an average outstanding
investment inflow of Rs.114.8 lakhs for the period.
However, the net annual inflow of NRI investment in the
scheme accounts for 22.5 per cent growth only, recording an
average inflow of Rs.35.4 lakhs per annum.
The trend
equation fitted also supports the results of the growth rate

I'RI(
value 0.7400), and it is found that the NRI interest
in the scheme is growing interestingly, and the growth rate

is proved statistically significant ('t' value 4.77) at 5
per cent level.
1w Y.9
Trmd of t h a d ~ R
e l l n m t m t ' in h i t s d I l l 1
Sthew
:unit Sche@e194
Ikppllcatlan Sil!sl(
IA~eraqe I 8routh 1 Trend Value

: I n v e s t ~ e n t I Rrte l lY I t b x l
1IRs.ln
I
1 Lakhsl :
-,
'
1 851.0
(110,bI
I 13.3
I
85lt190.7811
~ ~ ~ ~ l i c a t i o n 0 u t s t m d i n p ~ ~ i 8 1 5 0 5.6
.2
111531.91
Iksount of Baler
ik#ount outstandin!
~ ~ 5 t l r t V l a n
i
t
Lldrcn's i t P
lRpPiitatiDn Sales
ilotal R o a ~ l I
:Sales
1.81
0.1442
1.54
0.81bl;
51,10
18.bl
3.15
O.bbll
85.18
0.8238
13.52
0.9312;
29.15
19.64
9SI.b
13.1
152.61t131.0llrj21.125
6.11
9.6
131b.5+131.S01 111.b19
10.bh
9.3
1315,8~131.8?1ijll.5h9
11.19
0,1120j
22.5
35.3bt8.81~xI1.1600
1.98
0.1561
81.81
18.5
111.83+11.511xi 7.8b31
1.11
0.1400
109.10
0.11
0.0015
35.90
: (1I4,bl :
j 1316.5
I I400.bI
I 35.1
I 128.1l
111.8
11125.31
:
:
h5.5
ISb.31
9.1
16.31
51.0
I 130.11
1 1169.0
: 1812.3I
:
:
j
;
j
1 12.5
I
10.6
1 11.0
i
i
11.2
10.7
6.3
jl0018.b
:ao92.8l
I101aI l n v t r t f i m t
13ales
231.b
11188.11
j; 10.0 /
jQl9.5
I I$bl.bl j
15.7
81.88t17.11x
b.9105
512.b~65.1P(x
b.lb93
9.11+1.14lx
1 5.8281E
1-01
10.31
0.1301
31.05
2.17
0,1122
b1.51
i.
0.9641;
51.71
0.8755
1b.11
0.9116~
10.76
80.16
51t10.281xj b.91551~i 14.80

I-01
j
2lb~t2bl.8~lx~35.lll
j10018.b+b95.141xilb.563
lOulstandlng
I0utstandinp
189.S2t15.8~~ / 1 1 . ~ 8
1
ibrount~utstindlng
111.138
ikppllcation ~ u t s t m d i n p l l j 511.6
: Il81.9l
Ikanunt of Srles
8119.1t500.bl1xjbb.391
I (390.ll
ihlount Outstanding
Value I 'R1'ValueI t o - e l l i c i c n t l
I 01 variation:
j 189.5
19.1
1 1lhl.PI I
jlippil~ation~utstandinqf~1
1315.8
Arounl of Sales
I Standard:'!'
I Error I
1.50
j
i lll~.5tll0.8llx~29.~llj
231.bt5b.O)lx
'-I(
F ~ g u r ni n p l r m t l n w dmote slrndlrd devirlions.

) S l p n ~ l i r m tr t 5 per r n ! level
I ~ p p l i r a t l mI n n u e b r s
8 w r t e 1 C m p u t d m u 1 1 1 I r a * LLe c w ~ l l t dd l t a
160
ill.9b0
9.09
4.61
6.05
0.1331
0.8101;
50.65
j
j
The next major share of investment by NRIs in

units of UTI is the 'Children's Gift Plan'. The interest of
the NRIs in this plan alone has grown at 14 per cent,
whereas, the outstanding share of NRIs has grown at 21.2 per
cent accounting an average investment inflow of Rs.52 lakhs
annually.
The growth rate,of the scheme is found to be
'
0.9647) and statistically significant
consistent ( ' R ~ value
as the computed 't' value is 14.80 at 5 per cent level.
The growth rate of the overall NRI investment in
these schemes is only 15.7 per cent for the period.
However, the rates of growth these schemes show an upward
trend and the consistency is reasonable ('Fi2' value 0.8205).
As a whole, the growth rate is found statistically
significant as proved by the computed 't' value of 6.05 at 5
per cent level.
In fine, it may be concluded that the NRI
investment in all those schemes under UTI is found to be
growing at a higher rate excepting the 'Children's Gift
Plan' and the 'Unit Scheme 1964'. However, the growth rate
for all these schemes under UTI is found statistically
significant. The reasons for the higher values of the trend
may be the greater attraction of the former schemes.
Later
the N R I interest might have turned to the recently

introduced schemes.
Source-wise Analysis of NRI Investment in Units of UTI
The main sources of investment are 'direct

remittances from abroad', 'transfer from NRER and FCNR
accounts', 'transfer from NRO account', and 're-investment
of dividend', etc.
NRIs are allowed to invest in the units
of UTI under all the available schemes mobilising the

deposit from any one of the sources.
The source-wise
figures of NRI investment in different schemes under UTI are

presented in table V.lO.
It is inferred from the table that most of the NRI
investment in units of UTI has been made from the source of
'NRO account' followed by the 'NRERIFCNR accounts'.
The
share of 'remittance from abroad' and 're-investment of

dividend', etc.,
account for the least investment in
different schemes of units of UTI.

It can be understood that the source of 'NRO
account' accounts 54.73 per cent in the year 1987-88, as
against 33.27 per cent in 1978-79; the source of 'NRER/FCNR
accounts' records 36.97 per cent (Rs.40.08 lakhs) in 1978-79
as against 27.49 per cent (Rs.430 lakhs) in 1987-88,
registering more than a ten-fold increase over a decade.
It
is clear that the NRIs' share in the investments of units of

UTI (from the source of 'NRER/FCNRt and 'NRO accounts') has
positively increased; but the investment in units of UTI
from the source of 'NRER/FCNR accounts' shows a declining
h c r r l u 1111 I n v f ~ t n a t sI n L l t n of U l l h r l+n?q I
[lhrwnt .RI I n L l l h s l
'
hnr
1 tndlnq
1 Sill
{march
!
1
hourcr of Funds
1Rnltt1ncr i r o n 1 1 1 ~ n ~ i e1108
r
1 l r a n t f ~ ri r o n
Rbro~d
IMRIRIFCYR Account; MO Rrraunt
'
'
'
:Rf-lnvrst~rnt
;of V i l d f n d
'
'
I Uncl~ssf~ld
lotnl
'
1
I
IAppllu-1kountI
Ilppllca-/ h u n t /Applica-/~8cunt ihppl1c~-/ h u n t jlppl1c1-/ Anount 1Appllc1-I Anwnt 1 t i a l l t 1 l l I + 5 + l + I
1 tlon I
tlon I
I tion I
I tlon 1
I tlon I
1tbt8+101/ 9t111 j
/
I
I-(-(-I-I-I-I-I-I-I-I-(-I
I'
>I
1 6
1 9
l l O j l 1 j l 2 j 1 S j
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I
91 1 13,31 1 261 110.08 1 113 1 36,01 1 8b3 1 9.18 1 91

9,15
11 6.511 I 112.30lj 118.0Slj13b.911 j 17.80 Ij 133.211j 159.151; 18.111 j l6,15 1) 18.721
1918-79
1
/
,,
j
j
I159 108,12 j
1 1 0 0 1: 1100 l j
<
Il119-80 1 111 1 11.29 1 294 115.37 1 150 1 11.10: 916 I 11.12 I 11 i 1.91 I IS18 1 93.21 j
1
11 1.311 : 118,5111 Il1.3lIjl18.68I I 19.88 I1 I18,15l/ 162.3211 112.2511 11.12 I / 12.081 j I 1 0 0 Ij I 1 0 0 1;
<
I 1980-81 i 51 I 8.23 :
11 3,811 j 110.151j
1
,,
8
,
<
<
11981-82 1 115 1 11.80 :
II 9.571 I113.9511
1
<
'l
,,
<
211 111.11 1 lb6 I 20.00 I

116.241111b.111 19.11 l j 120.bllj
,
<
,
,
112 : 97.00 i 113 : e i . o o l
121.0811111.991 j 17.03 1: 135.0blj
, ,
<
I 11.91 I I010 i 13.81 I 11 1 2.08 I 1173 I 81.051

I: I 2 2 , l l l ~ 168.511: lll.lllj 11.15 lj 11.511 I 1 0 0 l j I I00 1;
,,
bb 1 1,bO I
l l 3.64I 1 11.15 11
,
,
I
,
,
,
,
,
1 1181-81 : 106 1 19.00 :
:I 1.961 I 18.23 11
I
,#
250 I38.95 I I39

11b~971,1l48,06l l9,11
:<
131 1 69.06 1 118 1 21.08

1056
18.11 I 9 1 1.52 1 1829 1 127.60I
123.5b11151.121 1 1B.09 11 116.5111 151.1111 111.1211 11.01 1: 11.191 1 1 100 11 I 104 Ij
: 1782-83 :
8
1
1121 1 23.08 I I 1 1 1.19 I 1811 I 96,91 I

Ibl.121j 123.8llj 13.53 Ij 11.631 1100 11 I 1 0 0 I:
:,
'l
1.00 I rlsa I 2si.00:

1322 j so.oo 1s
ibl.83lj 112.99lj 11.10 Ij 11.131 j I 1M) I / 1100 Ij
<
<
1 1981-85 I 138 1 19.00 1 511 : 109.00 1 101 1 1b8.00 1 1152 1 15,00 1 bB I 6.00 I 1583 I 631.00 1
1
11 5,341 (1 (2,98 lj l ? 0 , l l l ~ l l l , l l l 1, 115.611: 113,111j 156,221,1 15,501: l2,b3 I,; 10,911 j I 100 1,: I 100 I/
1
8
f
: 1981-86 I
219 I 11.00 1 839 I 112.00

I 1 1.161 j 15.08 1; 126.121j118.181
11 18.81 ,1 (l0.951j 131.91)j(23.211
4
,
: 1981-88 1 111 1
1
I 1000 I 161.00 I I851 1312.00
'
I
: l98b.81
<
(0.36 Ij I0.6BI
1100 Ij I 1W l j
: 110 1 195.001 1596 1 80.00 I 118 1 13.00 1 3212 1 906.00 1

j 1 1 l . l b l j lbS.b8Ij 119.691j 18.831 j 13.61 I / 11.131 j 1100 l j 1100 I\
,
,
: 603 : 853.00/ 1839 1 101.00~ 19 / 10.00 / 5320 ~1110.00 j
,
111.331j 118.031,I 131.511j 11.011
856.00'1 2110
98.00
I ~ B . O ~ 1882
1s0,on 1 896
11
I
11.5llj IlO.11lj 132,3bI/l21,171 j 115.211j 151.151~ 111.32lj lb.211
i
/
10
12.00
10,51 1 j 10.171
~
-I-I-I-<
f-I(<
-<
I-4
'-I-
Sourcrl Colpilfd fro8 thf u l l t t l n s 01 the Unit T r u d 01 Indla, Robbay for servfrnl years.
Mot! Fi(ures i n P t r r n t h f i , dfnotr grcfntapcs to t o t a l
511s i1sac.w
I 1 0 0 Ij I 1 0 0 I/
trend, and in the case of 'NRO account' the share of the

source has been increasing at a higher rate.
It may be due
to the interest of the NRIs returning in the following years

to utilise fully the funds invested on non-repatriation
basis.
The investment from the sources 'remittances from
abroad' and
're-investment of dividend' has slightly
declined. However, these sources have been picking up in

terms of 'remittances from abroad' accounting for Rs.168
lakhs in 1987-88, as against Rs.13.34 lakhs in 1978-79,
registering about a thirteen-fold increase over a decade.
The investment from the source of 're-investment of
dividend, etc'., has increased to Rs. 98 lakhs in 1987-88
from Rs.9.48 lakhs in 1978-79 recording more than a ten-fold
increase over the period.
This, according to the source-
wise analysis, shows that the share of investment is

declining.
But the NRI investment has registered a more
than ten-fold growth over the period.

The progress of source-wise NRI investment in
units of UTI is also tested with the help of a statistical
tool of trend equation analysis.
It has been fitted for
each case, worked out, and the results of the analyses are
shown in table V.11.
It is inferred from the table that the
investment from the source of 'remittance from abroad' has

grown at 28.8 per cent as a whole for the period, recording
l r m l 01 W i c ) d ~RI Imvnht i n bits 01 1111

>
Sourc!
1Avrrrpr 1 Growth 1 lrend Value

IlnvrstnrntI Rate 1 IY = r t bxl
I1Rs.in
1
1
;11khrI
;
1
, -G
a t l l t t r n c r i fro1 Abroad
Appl~cIti~n~l~
; Alounl
18.0
<
4
4
~11.12t15.18lx
<
' C r ~ d ~ ir01
l ~ d NRERliCNR Ac[ountr 1lO.b : 21,l
: Appl~crtionrll
: 1b03.11 1
Iredltpd iron MA0 Account

Appllration~tI
Gnount
1 110.8
: 1131.11 :
A~ount
:
(
1.1
Figures I n parrnlherel d r n ~ t rr t a n d ~ r ddevlrtionr.

' S i ~ n i i l c r n t r t 5 prr crnt l r v e l
' l R p p l l r r t r ~ nI n nunbrrs
l ' ~ S l q n i l l r m t at onr $ t r cent l r v r l
Sourrr: Conputrd r t r u l t s trot the r w p i l s d d ~ t a
b.11+0.8All1:
0.~812j
135.10
0.6963
81,8l
1 0.12b9 1
91.1b
11.11
1,18
5.b4
0.1'192
115.01
10.11
0.'1349
29.10
1 12.29lll.lltx
3.33
8
12.3 1 26.3
115.11 1
b.4
11.11
/18.813
~1311,5+131.1$x
19,1+5.011
111.X
1 0.7562
9.1
1.98
/ 29b.S3+lOA,lAIx
1 O.SJO5
,
10.909 j
I 311.2+12.181x
j 29L.S
11.3
11311.11 1
:
:
1.13lb!
3.13
1 138.82+58.921~ 1 8.4350 1 1.61
lb.O
Re-inuert#mt of Divldrnt, eti.; 1317.5

lipplirat~ondl
1 1100.31 1
, Anount
1 1101Ltl15,211x 1
1 20.0
1 121.2
: 1210.11
'(
1 2b.813
I lJ9,Sl 1
Gnount
: 101.1t81.111x
281.1 1 11.5
I 1325.61 1
11.1
:
j
1 S t m d r r d l ' l ' Value I 'RI'Valuel Co-rfllclrnt:

Error :
1
1 of v1rirtlm1
l1.Lll
11,513
1.80351
A.lb
1 0.82581
83.W
1,18901
0,10
1 0,0013
L9.35
3.9b3bE;
-01
2.21
1 0.38b81
b3.77
'
'
an average investment inflow of Fis.47.4 lakhs per annum.

The growth rate is found statistically significant as proved
by the computed ' t ' value of 3.33 at 5 per cent level.
While the average inflow of investment from the
source Of 'transfer from NRER/FCNR accounts' records
Rs.138.8 lakhs, it accounts for Rs.324.2 lakhs from the
source of 'transfer from NRO account'.
The overall growth
rate of the investment from the sources are also found at

26.8 per cent and 37.3 per cent respectively for the said
sources. From the table it is clear that the trend equation
analysis for the NKI investment from the sources of
'NRER/FCNR1and 'NRO accounts' reveals that the growth rates
of the investment from the said sources are found to be
statistically significant. The computed 't' values of 4.61
and 5.64 are for the sources of 'NRER/FCNR1 and 'NRO
accounts' respectively.
In addjtion, the growth rate and
relationship for the investment from these sources are

almost similar/equal as shown by the calculated 'R2' values
of 0.7269 and 0.7992 respectively for the sources.
The N R I investment from the source of 'reinvestment of dividend' i n units of UTI has grown at 26.3
per cent fcr the period, registering an average investment
inflow of Rs.42.3 lakhs per annum. The consistency is also
is Statistically significant, as evidenced by the computed

't' Value of 6.16 at 5 per cent level. The investment from
the source 'unclassified' has grown at 2.4 per cent only
recording an average investment inflow of Rs.6.4
annum.
lakhs per
llowever, the trend equation analysis reveals that
the growth rate for the NRI investment from the source
'unclassified' 1s statistically significant, as proved by
the computed It' value of 2 . 2 5 at one per cent level.
From these analyses it can be concluded that the
overall growth of the NRI investment from all the said
sources is statistically significant. It means that the NRI
interest in units of UTI in general has been growing at an
enormous rate.
GHAFTER VI!
AWARENESS AND AVAILING OF FACILITIES AND INCENTIVES
Introduction
An attempt has been made in the previous chapter
to analyse the investment made by NRIs in shares, and
debentures of the Indian companies.
Analysis was also
extended to company deposits, units of UTI, etc.
This
chapter attempts to discuss mainly the awareness and

availing of the facilities and incentives offered to NRIs.
Before discussing this aspect it would be better
to understand some of the main characteristic features of
the sample respondents such as age, education, religion,
occupation, income, country of residence, type and size of
the family, etc.
It is estimated that in all about 10 to 12 million
NRIs excluding persons of Indian origin with non-Indian
citizenship, are spread all over the world.
Their
investment potential is substantial at around Rs.250 to 300

billions.
However these NRIs form a heterogeneous group;
for instance, NRIs from West Asia constitute skilled and
semi-skilled workers who sought employment in the wake of

the oil boom, whereas, NRIs in developed countries are
highly qualified professionals like doctors, engineers,
software specialists, etc.
While there are about 1.7 lakh
people of Indian origin in Kuwait, some 70,000 Indians live

in the USA making a significant contribution to America's
scarce pool of sophisticated skills and scientific and
professional knowledge.
The contribution of NRIs to India's development
has been of a varied nature.
NRIs from West Asia, through
remittances, have contributed to boost the foreien exchange

reserves of the country.
Roughly, the share of private
transfers from West Asia is more than a third of the total

invisible exports. On the otherhand, NRIs from the USA and
Europe, being highly professional and prosperous, make their
contribution to India's economic development in the form of
technology, and in managerial fields.
Of the total respondents of 132, 96.21 per cent

are presently Indian, i.e., still holding Indian Passport,
and the rest are of other nationality, though of Indian
origin. On studying their visits to India, it is found that
while about 91 per cent of the respondents visit India once
in a year, ~ i n eper cent of them visit once in a couple of
years either for personal or business purposes.
For the purpose of analysis the 'Country of
residence' of the respondents has been discussed under four
categories, viz., 'A' (the USA and Canada), 'AA' (Asian
Countries including Saudi Arabia, Kuwait, Iraq, Iran,
Singapore, Japan, etc.),
'E' (European countries including
the U K , FRG, Switzerland, France, Italy, Sweden, Australia,

etc.),
'EE' (East European countries including the GDR,
Czechoslovakia, Hungary, etc.).

Age group-wise distribution of respondents
according to their country of residence reveals that a vast
majority of them are in the age group of '36 to 45 years'.
Analysis of their level of education shows that about 50 per
cent of the respondents who have education only upto the
level of 'Matriculation' live in 'AA' group countries.
Besides, the chi-square value also supports the significant
relationship between the country of residence and the level
of education, and that between the country of residence and
religion.
Occupation-wise distribution of the respondents
shows that a majority of them in 'AA' group countries are
employed as either 'worker or technician'.
In contrast, a
huge majority of them who stay in 'E' and 'EE' group

countries work as doctors, engineers, supervisors, and
executives, Distribution of respondents according to income
shows that there is a significant relationship between the

country of residence and income of the respondents and also
the family size.
The distribution of respondents according to their
age and level of income shows that a majority of the middle
aged (36 to 45 years) group respondents earn an annual
income between Rs.30,001 and Rs.50,000.
The chi-square
analysis reveals that there is a significant relationship

between the level of education and the income of the
respondents, and between the level of education and religion
as well.
Further a significant relationship is also found
between the religion and reason for leaving India.

What follows is an analysis of the awareness and
availing of the investment facilities and incentives by the
respondents. For this purpose, the abbreviations
'A'
(Aware), 'NA' (Not Aware), 'AV' (Avail), and 'NAV' (Not

Avail) have been used for presenting the implications in a
precise manner.
Awareness and Availing of the Facilities According to

Country of Residence, Religion, Age Group, and Level of
InAn attempt has been made to study the awareness
and availing of the investment facilities according to
country of residence of the NRI investors, and the results
are presented in table VI.l.
The table reveals that a
T a a g VI.l
of Faciltiee According to
Religim, Age Oruop, and ~eselof ~ t i c a
A . r r e n o e p s aod A v a i l i o g
of Mi-,
Total Mean Scores

Variables
Awareness
A
Availing
NA
AV
0.5
NAV
---A
17.5
(14.54)
1.68)
12.3
(32.37)
AA
18.3
(14.97)
3.7
(47.53)
9.5
(14.70)
12.5
(17.44)
6.31
(51.93)
3.7
(20.02)
22.4
(37.56)
44.6
(48.76)
22.4
(18.36)
2.6
(10.76)
4.4
(15.36)
15.7
(17.36)
muntry of
Residence
EE
Hindu
Religion
35.3
27.7
59.7
3.3
(49.27)
(11.27)
(54.03)
(38.83)
Muslim
21.8
(17.67)
4.2
(55.46)
8.3
(12.Rr4)
18.7
(34.32)
Cnristien
17
(14.11)
1
(5.11)
(19.97)
9
(9.21)
2.28
(18.94)
1.2
8.15)
8.5
(13.4 )
13.1
(18.32)
(17.92)
(58.09)
(13.58)
(23.98)
79.9
(65.94)
5.1
(18.57)
31
(48.25)
(58.78)
19.4
(16.14)
0.6
3.34)
13.6
(38.17)
Sikh
Upto 35
36 to 45
Age Croup
46 8 above
Upto Matric
Level of
Education
5.7
6.45)
18.1
5
8.8
20
54
6.4
7.24)
16.2
5.8
4.2
17.8
(14.52)
(55.74)
(7.77)
(23.19)
Degrees 8 FG
Degrees
59.7
(49.7 )
1.3
( 6.2 )
27.8
(56.27)
33.2
(34.75)
Diploma & Tech.
43.8
(35.8 )
5.1
(18.05)
19.9
(35.96)
29.1
(32.07)
Degrees
----
Source: Canputed fmn Survey Data

Figures in Parentheses Denote total mean scores of percentages
majority of the respondents who belong to ' A A '
group
countries are very well aware of the investment facilities;

the mean scores value of the respondents alone accounts for
17.5.
The mean scores value of ttie res~ondents for 'EE'
group countries accounts for 22.4. However it is seen from

the 'country of residence1-wise classification that the
respandents who belong to ' E ' group countries lead among the
various categories, in the availing of the investment
facilities.
It is clear from the analysis that on an
aggregate, the mean scores value for the respondents who are
aware of the investment facilities accounts for 121.3; that
for those who are not aware of the schemes accounts for
10.7.
On the other hand, the respondents, who avail and who
do not avail those facilities record respectively 53.5 and

78.5. However, it is seen that the NRERJFCNR bank account
deposits are familiar to all of the respondents irrespective

of their country of residence.
It can be seen that out of
the total respondents contacted no one was unaware of the

NREH/FCNR bank account deposit.
While all the respondents
avail themselves of the NRER scheme, only 9 respondents did

not maintain an FCNR account.
The table further reveals that all the respondents
1
who belong to 'EE' group countries are familiar with the
NRER/FCNR bank accounts and direct investments of both, '40
per cent' and ' 7 4 per cent" schemes. On the otherhand, NRIs
who stay in ' A A ' group countries know about all these
schemes excepting 2 respondents each who do not know the
non-repatriable direct investment schemes and company
deposits.
However all of them did invest in government
securities.
It can be concluded that as far as the bank
deposit accounts are concerned, the respondents are aware of
the
repatriable portfolio investment schemes whatever be
their country of residence. However, there is a significant

relationship between the country of residence and the
awareness of the other investment facilities, and it is
proved by the calculated value of chi-square (44.20)
at 6
degrees of freedom at 5 per cent level.

An attempt has been made to identify the
relationship between religion and awareness of the
investment facilities of the respondents.
observed
It is also
from the table that all the respondents
irrespective of their religion are aware of the investment

facilities of bank account deposits, and they also avail
themselves of such facilities.
It is seen that all the 63
'Hindu' respondents are aware of the existence of the

NRER/FCNR bank account facilities, and all excepting three
have availed themselves of such facilities.
As far as the
'40 per cent' and '74 per cent' schemes are concerned the
same trend prevails with regard to the awareness of the

schemes; but only 20 and 38 respondents avail themselves of
the
' 4 0 per cent' and
the
'74 per
cent' schemes
respectively.
The mean scores value for the data of 'Hindu' and
'Muslim' respondents show that 49.27 per cent and 17.67 per
cent respectively of the respondents are aware of those
facilities.
While 54.03 per cent and 12.59 per cent (mean
Scores) respectively could invest in the available schemes,

38.83 per cent and 34.32 per cent of the respondents
respcctively did not invest in the available schemes. 14.11
per cent of the 'Christian' and 18.94 per cent of the 'Sikh'
respondents are aware of such
facilities; 19.97 per cent
and 13.40 per cent of the respondents respectively actually

avail themselves of such facilities.
S o , it can be
concluded that there is an insignificant
relationship
between awareness and availing of the investment facilities

among the religious groups of the respondents.
It is also
proved by the computed chi-square value of 18.26 at 9

An attempt has been made to correlate the
relationship between the 'awareness and availing of the
facilities',and 'age-groups'. It is found (vide table VI.l)
that there is no difference at all in the awareness of the
bank account facility among all the categories of age group.
However, there are some differences in the availing of such

facilities.
It is seen that out of 27 respondents, who come
under the age group of 'upto 3 5 ' , only 22 avail themselves

of the facilities, whereas out of 20 respondents who belong
to the same category of age group, only one does not avail
himself of the FCNR scheme of bank account facility.
The
mean scores value of the respondents for the awareness of

the facilities shows that 17.92 per cent and 65.94 per cent
of them who belong to the age groups of 'upto 35' and '36 to
45'
respectively are aware of the investment facilities.
16.14 per cent of the respondents of the age group of ' 4 6 &
above' are also well aware of such facilities.
The mean
scores value of the respondents for availing such facilities

shows that 13.58 per cent, 48.25 per cent, and 38.17 per
cent of the respondents of the age groups of 'upto 3 5 ' , '36
to 4 5 ' ,
and ' 4 6 & above'respectively avail themselves of
such facilities. So, it can be concluded that there is some

difference among the age groups in awareness and availing of
the investment facilities. However it is proved by the chisquare value of 13.29, at 6 degrees of freedom at 5 per cent
level, that there is an insignificant relationship among the
age groups as far as the awareness and availing of various
facilities are concerned.
Education is the main factor that determines a
person's ability, awareness and availing of facilities, etc.
It is observed from the analysis of data pertaining to
awareness nnd availing of the facilities and level of

education (vide table VI.l)
that there is not much
difference among the respondents of their awareness of the

facilities whatever be the level of education.
It can be
seen from the table that all of the respondents irrespective

of their level of education are aware of all such investment
facilities. Except a very few respondents all of them have
availed themselves of such facilities also.
The mean scores value of the respondents show that
14.52 per cent, 49.7 per cent and 35.79 per cent of them of
the categories 'upto Matric', 'Degree and PG Degree', and
'Diploma and Technical Degree' respectively are aware of the
facilities.
On the other hand, 7.77 per cent, 56.27
per
cent, and 35.96 per cent (mean scores) of the respondents of

the said educational levels respectively avail themselves of
such facilities actually.
The mean scores value of the
respondents also show that 4.2 per cent, 1.3 per cent, and
5.1 per cent respectively are not aware of such investment
facilities. So, it can be concluded that there is not much

difference among the kategories of educational level
regarding the awareness and availing of the investment
facilities.
It is also evident from the computed chi-square
value of 9.35, that it shows insignificant relationship at 6

Awareness and Availing of Facilities According t o

Occupation, Level of Income, Duration of Stay Abroad, and
Iteasons for Leaving India
Awareness and availing of facilities according to
the occupation of the respondents are analysed, and the
results are shown in table VI.2.
It is observed from the
table that there is not much difference among the occupation

groups of the respondents regarding the awareness and
availing of such facilities.
While almost all of the
respondents are aware and avail themselves of the NRER

account of bank deposit irrespective of their occupation,
there are few respondents who are aware of such facilities
but do not avail themselves of the FCNR account.
With
regard to direct investment, the respondents who work as

either 'Supervisors & Executives' or 'Doctors & Engineers'
are well aware of such facilities; however, the category of
respondents of 'Supervisors & Executives' avail themselves
of such facilities better than the resp~ndentswho serve as
'Doctors & Engineers'. The same type of climate also exists
in portfolio investment facilities in the case of these two
categories of respondents regarding the awareness and
availing of the facilities.
The mean scores value of the respondents who work
as 'Workers and Technicians' and 'Supervisors & Executives'
show that 16.69 per cent and 33.63 per cent respectively of
them are well aware of such facilities. On the otherhand,
T
of In-,
-1
m VI.2
A d l i n g of Pacilties kcording to ~mrpaticm

m t i m Of 8-y Abroad and Reaams for Leaa'~-
Total Mean Scores

Variables
Awareness
A
Availing
NA
AV
NAV
---Workers &
Technicians
20.8
(16.69)
7.3
(9.09)
18.7
(25.53)
Supervisors &
Executives
40.4
(33.63)
0.6
(2.35)
18.2
(36.29)
22.8
(23.62)
Dxtors &
Engineers
31.4
(26.14)
0.6
(3.08)
17.2
(39.7)
14.8
(14.6)
Businessmen 8
Others
28.7
(23.53)
4.3
(43.72)
10.8
(14.92)
22.2
(26.25)
12.4
(9.95)
4.6
(58.13)
5.1
(7.95)
11.9
(17.55)
Rs.30001to50,WO
52
(42.99)
3
(9.28)
18.6
(31.04)
36.4
(42.3)
Rs.50001 & above
56.9
(42.4)
3.1
(10.6)
29.8
(61.01)
30.2
(30.15)
4.78)
(20.9 )
5.2
(30.85)
Occupation
Upto Rs.30,000
Level of
Incm
Upto 3 years
13.1
3.9
11.4
5.6
7.98)
(58.87)
4 to 6 years
61.7
(50.92)
4.3
(18.71)
19.6
(30.47)
46.4
(51)
7 8 more years
48.2
(40.11)
0.8
(2.42)
30
(64.75)
19
(18.09)
Duration of
Stay Abroad
-9.5
8.5
0.6
For Higher Studies 17.4

(14.47)
or
Employment
Reasons for
Leaving
India
For Business
For any Other
Purpose
8.34)
3.28)
(17.57)
60.1
(49.69)
3.9
(20.75)
30.7
(56.45)
33.3
(33.42)
29.7
(24.48)
2.3
(13.65)
8.6
(19.54)
23.4
(25.28)
14.1
(11.35)
3.9
(42.31)
4.7
6.44)
13.3
(22.96)
----
Source: Qmplted from Survey Data

Figures in Parentheses Denote total mean scores of percentages
179
the mean scores value of the respondents shows that those

who come under the categories of 'Doctors & Engineers' and
'Businessmen & others' record 26.14 per cent and 23.53 per
cent for awareness of such facilities.
So it is seen that
while there is much difference between the occupation

categories, 'Workers & Technicians'
and 'Supervisors &
Executives' regarding the awareness of such facilities, that

between
the categories
'Doctors &
'Businessmen & others'is rather small.
Engineers'
and
However, the mean
scores value of the respondents for the said categories of

occupation shows that there is not much differences between
the two categories, 'Supervisors & Executives' and 'Doctors
&
Engineers' in availing such facilities. At the same time,
not much difference is found between 'Workers 8 Technicians'

and 'Businessmen & others' in availing such facilities.
So
it can be concluded that the respondents who work as either

'Supervisors & Executives' or 'Doctors & Engineers' avail
themselves well of the investment facilities than the other
occupation categories of the respondents.
However, an
insignificant relationship is seen in the computed chisquare value of 15.16 at 9 degrees of freedom at 5 per cent
level.
The income of the respondents may also influence
the awareness and availing of such investment facilities.
An attempt has been made to identify the influence of income
in this regard.
It is inferred from the analysis (vide
table VI.2) that there is no influence of income on

awareness and availing of the bank account facilities,
whereas, it has a small influence on awareness of direct and
portfolio investment facilities.
Accordingly three
respondents are not aware of the '40 per cent' and '74 per
cent' schemes of direct investment facilities.
However the
'middle and upper income group' respondents are well aware

of all the investment facilities except a few schemes.
So,
it can be understood that there is some influence of income

on awareness and availing of such investment facilities.
The mean scores value of the respondents who come
under the income brackets of 'upto Rs.30,0001 and 'Rs.30,001
to 50,000' shows that 9.95 per cent and 42.99 per cent of
them respectively are well aware of such investment
facilities.
On the other hand, 42.40 per cent of the
respondents who come under the higher income bracket are

also aware of the facilities.
So, it is understood that
there is not much difference between the middle income and

higher income groups of the respondents regarding the
awareness of the facilities.
However, the lower income bracket respondents are
less in number regarding the awareness of the facilities.
The mean scores value of the respondents for the three
categories of income group (viz., lower, middle, and higher)
shows that 5.1 per cent, 18.6 per cent, and 29.8 per cent
respectively
avail themselves of such investment
facilities. So it can be concluded that the level of income

of the respondents has a direct influence on the awareness
and availing of the investment facilities.
However, the
computed value (13.27) of chi-square proves that there is an

insignificant relationship between the different categories
of level of income of the respondents regarding the
awareness and availing of such investment facilities.
An attempt has been made to estimate the
differences of the relationship between the 'reasons for
leaving India' and awareness and availing of the investment
facilities.
It is understood that there is not much
difference between the different categories of 'reasons for

leaving India' regarding the awareness of the facilities.
It is seen that all of the respondents irrespective of the
'reasons for leaving India', are aware of the bank account
deposit facilities; the respondents who went abroad for any
other purpose, except for higher studies, employment, and
business, are not much aware of the direct investment
facilities.
The mean scores value of the respondents shows
that 14.47 per cent, and 24.48 per cent of the respondents
are aware of such investment facilities accordingly as they

went for 'higher studies' and for 'business' respectively.
Those respondents who went abroad for 'employment', or for
'any other purposes' record 49.69 per cent and 11.35 per
cent respectively regarding the awareness of such
facilities. So it can be said with confidence that the NRIs
who went abroad for either 'employment or business' purposes
are more aware of the investment facilities than the other
categories of the respondents.
On studying the availing of the facilities

according to 'reasons for leaving India',
that the
It is observed
respondents who went abroad for 'employment'
purposes avail themselves well of such facilities. It alone

records the mean scores value of the respondents at 56.45
per cent.
While the mean scores value of the respondents
records 17.57 per cent for the respondents who went abroad
for 'higher studies', it records 19.54 per cent and 6 . 4 4 per
cent for 'business' and 'any other purpose' respectively.
So, it can be concluded that the respondents who went abroad
for employment purpose lead in respect of the awareness and
availing of such investment facilities.
However, an
insignificant relationship is shown by the computed value

(11.89) of chi-square at 9 degrees of freedom at 5 per cent
level.
An attempt is also made to find out whether the
duration of stay abroad has got any impact on the awareness
and availing of the facilitles.
The analysis reveals that
the respondents are aware of and avail themselves of the
bank account facilities irrespective of their stay abroad.

Almost all of them are aware and avail themselves of such
facilities. However, in the case of direct investments the
reactions are mixed, and it is seen that 51.16 per cent and
50.39 per Cent of the respondents who stay abroad for a
period of '4 to 6 years' are aware of the '40 per cent
scheme' and '74 per cent scheme' respectively. Only 10.85
per cent and 11.63 per cent' of the respondents who stay
abroad for a period
'upto 3 yearst are aware of such
investment schemes under direct investment facilities.

The mean scores value of the respondents reveals
that 7.98 per cent and 50.92 per cent of the respondents who
stay abroad for the periods 'upto 3 years' and '4 to 6
years' respectively are aware of the facilities, whereas
40.11 per cent record for the category of '7 and above
years'.
Studying the pattern of availing of such
facilities, it is found that the respondents who stay abroad

for longer duration (7 & more years) avail themselves of the
facilities more than the respondents who stay abroad for
shorter duration.
It is evident from the table that while
the mean scores value of 64.75 per cent shows that those
respondents who stay abroad for longer duration avail
themselves well of the facilities, the mean scores value
records only 4.78 per cent for the respondents who stay
abroad for shorter duration.
So one can conclude that the
'duration of stay abroad' has a direct influence on the
availing of such investment facilities.
It is also proved
by the computed chi-square value (31.12) at 6 degrees of

freedom at 5 per cent level that there is a significant
relationship between the
categories of duration of stay
abroad regarding the awareness and availing of such

facilities.
Awareness.and Availing of Incentives and Concessions

The following paragraphs deal with the awareness
of and the availing of the incentives and concessions by the
NRI investors.
Awareness and Availing of Incentives and Concessions

According to Country of Residence, Religion, Age Group, and
Level of Education
An attempt has been made in table VI.3 to study
the awareness and availing of the incentives and concessions
according to the country of residence.
The table reveals
'that the majority of the respondents who belong to ' E l group

countries are very well aware of the various incentives and
concessions offered.
respondents of this category alone records 49.87 per Cent.

The mean scores value of the respondents for ' A A ' group
countries and ' E E ' group countries records 15.81 per cent
and 18.19 per cent respectively.
respondents belonging
It is found that the
to 'E' group countries dominate in
Anueoess aad Availing of Incentives and Coooe88io~sAaarding

to b t r g of Besidaace, Ueligim, Age Gmup aad Leven o f Imcatim
Total Mean Swres

Variables
Availing
Awareness
NA
AV
NAV
---A
Country of
Residence
16.79
(15.81)
( 3.91)
13.5
(23.08)
( 7.27)
AA
17.86
(16.13)
2.29
(18.06)
13.86
(21.76)
6.29
(12.25)
56.86
(49.87)
3.43
(26.5 )
33.57
(40.37)
26.71
(47.71)
EE
20.29
(18.19)
2.71
(22.96)
11.79
(14.79)
11.21
(25.63)
Hindu
Religion
4.07
19.36
39.5
1.79
57.07
(51.87)
( 8.8 )
(53.51)
(26.06)
Muslim
18.71
(16.32)
5.43
(47.01)
9.71
(11.27)
14.43
(38.12)
Christian
16.43
(14.77)
0.29
( 1.51)
12.93
(22.02)
( 6.27)
19.57
(17.03)
1.71
(14.11)
10.57
(13.19)
10.71
(22.41)
Sikh
Upto 35
3.79
13.5
9.93
6.64
16.79
(14.14)
(53.2)
(12.28)
(37.53)
36 to 45
76.29
(68.39)
2.0
(13.84)
45.86
(57.53)
32.43
(51.16)
46 & above
18.71
(18.71)
0.57
(17.47)
16.93
( 4.39)
( 4.17)
(12.28)
(35.81)
(10.84)
(26.18)
Cegrees & PC
Degrees
56.14
(51.13)
1.29
( 8.74)
43
(63.94)
14.43
(19.07)
Diploma B Tech.
41.14
(36.50)
3.71
(26.88)
21.71
(25.21)
23.14
(47.61)
Age Group
Upto Mntric
Level of
Education
0.79
kgreos
2.36
10.71
8
4.21
14.5
----
Source: ~anputedfmm Survey Data

~ i g u r e sin parentheses denote totdl mean s w r e s of percentages.
186
all the categories of the group of countries in respect of

the awareness of the incentives and concessions.
It is seen from the table that, on an aggregate,
the mean scores value for the respondents who are aware of
the incentives and concessions accounts for 111.79.
The
respondents who are not aware of the incentives and

concessions account for 9.21.
On the other hand, the
respondents who avail themselves of those incentives and

concessions and those who do not record 72.71 and 48.29
respectively. However, it is seen that two incentives viz.,
"balances on FCNR/NRER accounts are repatriable" and
"earnings on FCNRINRER accounts are exempted from income
tax" are familiar to all the respondents irrespective of
their country of residence.
avail themselves of
While all of the respondents
the 'higher interest rates', only a few
of them do not avail themselves of the special series of

cheque facility.
The table further aeveals that a majority of the
respondents are aware of the provision "risk of exchange
loss is protected in FCNR account", and an equal number of
respondents avail themselves of such incentives also.
It
can be concluded that the respondents are aware of the

incentives,' irrespective of their country of residence.
Further, it is found that there is an insignificant
relationship between the 'country of residence' groups in
respect of the awareness of the incentives and concessions;

this is proved by the computed value of chi-square (5.44) at
9 degrees of freedom at 5 per cent level.
Also an attempt has been made to identify the

relationship between the religion and awareness of the
incentives and concessions. It is understood from the table
that there
1s
not much difference between the religion
groups in respect of the awareness of the incentives such as

"balances on FCNRINRER accounts are repatriable", "interest
rates on FCNRJNRER accounts are higher", "local payments can
be easily debited to NRER account" and "special series of
cheque facility is available in NRER account". However, all
of the respondents do not avail themselves of such
incentives accordingly.
It is seen that almost all 'Hindu'
respondents are aware of such incentives, whereas most of

the 'Muslim' respondents are aware of a part of the package
of incentives only,
and almost all of the 'Christian' and
'Sikh' respondents are aware of such incentives.

The mean scores value of the 'Hindu' and 'Muslim'
respondents shows that 53.51 per cent and 11.27 per cent of
each category of the respondents avail themselves of those
incentives and concessions.
While 22.02 per cent of the
'Christian" respondents avail themselves of those

incentives, only 13.19 per cent of the 'Sikh' respondents do
so.
The figures of 6.27 per cent and 22.41 per cent of the
mean scores of the Christian and Sikh respondents

respectively show that they do not avail themselves of such
On the other hand, 26.06 per
cent and 38.12 per Cent (mean scores) of the Hindu and the
Muslim respondents respectively show that they do not avail
themselves
of
such
incentives
and
concessions.
Though it seems to be much difference between the 'religion

groups' of the respondents in respect of awareness and
availing of such incentives and concessions the computed
value of chi-square (18.38) at 9 degrees of freedom at 5 per
cent level proves that there is an insignificant
relationship between the religion groups in respect of the
awareness and availing of the incentives and concessions.
An attempt has been made to correlate the

relationship between the awareness and availing of the
incentives and concessions and age groups.
It is found from
the analysis that a majority of the respondents are aware of

such incentives and concessions.
However, the 'middle age
group' respondents are well aware of the incentives and

concessions than their counterparts in the other age groups.
The mean scores value of the respondents shows that 14.14
per cent and 18.71 per cent of them who belong to the age
groups of 'upto 35' and '46 & above' respectively are aware
of such incentives.
The respondents who come in the age group category

of '36 to 45' record 68.39 per cent. On the other hand, the
mean scores value of the respondents shows that 12.28 per
cent, 57.53 per cent and 4.39 per cent of them who come
under different age groups, v l z . , lower, middle, and higher
respectively avail themselves of such incentives and
concessions.
So, it can be concluded that there is a
significant difference of relationship between the different

age groups of the respondents in respect of the awareness
and availing of such incentives and concessions. It is also
proved by the computed value of chi-square (27.11) at 6
To identify the effect of education on the
awareness and availing of the incentlves and concessions, an

attempt has been made, and the results are presented In the
sald table.
It is observed from the table that there is
much difference between the educational groups of the

respondents in respect of the awareness and availing of the
data shows only 12.28 per cent of the category of 'Upto

Matric'.
The corresponding figures for the categories of
'Degree and PG Degree' and 'Diploma & Technical Degree' are

51.13 per cept and 36.59 per cent respectively.
The mean
scores value shows that 35.81 per cent of the respondents

who have studied 'upto Matric' are not aware of the
incentives, whereas, the percentage of the respondents for
the category of 'Degree and PC Degree' is only 8.74.
The
corresponding figure for the category 'Diploma & Technical

Degree' records 36.59 per cent only.
The mean scores value of the data also shows that

there is much difference between the educational groups in
the availing of such incentives.
It is seen that 10.84 per
cent of the respondents who have studied 'Upto Matric' avail

themselves of such incentives, whereas 63.94 per cent and
25.22
per cent of the respondents who come under the
categories of 'Degree and PC Degree' and 'Diploma and

Technical Degree' respectively avail themselves of such
facilities.
liowever, the respondents who do not avail
themselves of such incentives record for 26.18 per cent,

19.07
per cent and 47.61 per cent respectively.
S o , it can be concluded that the level of

education of the respondents has a direct influence on
However, the computed value ( 1 8 . 4 3 )
of chi-square at 6
degrees of freedom at 5 per cent level proves that there is

an insignificant relationship between the categories of
'different levels of education' in respect of the awareness
and availing of the incentives and concessions,
Awareness and Availing of Incentives and Concessions

According to Occupation, Level of In-,
Duration of Stay
Abroad , and Reasons for Leaving India
T o estimate the relationship
between
the
occupation groups of the respondents in respect of the

awareness and availing of the incentives and concessions, an
attempt has been made, and the results are shown in table
V1.I.
It is understood from the analysis that there is not
much difference between the various occupation groups of the

respondents in respect of the awareness and availing of such
respondents shows that 17.82 per cent of them who are

employed as 'Workers and Technicians' are aware of such
incentives.
The mean scores value of 20.66 per cent shows
that the respondents who do 'Business and have been involved

in the business-related activities' are also aware of such
incentives.
The mean scores valdes of 33.4 per cent and 28.12
per cent show that the respondents who serve as either
'Supervisors or Executives' and as either 'Doctors or
Engineers' respectively are aware of such
incentives.
However, the mean scores value of the respondents shows that

43 per cent and 30.48 per cent of them who belong to the
categories of 'Supervisors 8 Executives' and 'Doctors and

Engineers' respectively avail themselves of such incentives
and concessions. The mean scores value shows that 13.96 per
TMEE VI.4
-A
sod Availing of Incentives rrnd Concea6ima According to

Occupation, k v e l of In-,
m t i m of stay Abrmd,
and Reasms for Lea*
1rdi.e
Total Mean Scores
Variables
Availing
Awareness
....................
NA
AV
NAV
Workers &
Technicians
19.93
(17.82)
3.36
(26.02)
10.07
(13.96)
11.79
(24.89)
Supervisors &
Executives
37.43
(33.4 )
0.29
(1.83)
28.36
(43)
9.36
(12)
Doctors &
Engineers
30.21
(28.12)
0.79
(4.65)
20.64
(30.48)
10.36
(17.81)
Businessmen &
Others
24.21
(20.66)
4.79
(38.93)
12.21
(12.55)
16.79
(38.16)
----
occupation
Upto Rs.30,000
9.93
(8.24)
9.86
(32.55)
45.93
(39.72)
2.5
(17.45)
27.57
(34.32)
20.86
(32.02)
Rs.50001 & above
55.93
(52.04)
2.21
(10.98)
40.57
(59.59)
17.57
(28.29)
( 8.37)
(41.31)
( 8.54)
(30.68)
55.5
(48.19)
3.21
(18.43)
34.93
(44.31)
23.79
(36.8)
46.21
(43.44)
1.93
(11.7 )
32
(46.91)
16.14
(25.38)
(15.96)
(4.84)
(18.06)
(14.34)
For bployment
59.21
(54.25)
1.64
(10.73)
39.64
(55.35)
21.21
(34.22)
For Business
23.71
(19.62)
3.71
(22.29)
15.5
(18.41)
11.93
(21.13)
For any Other

Purpse
11.86
(10.17)
3.14
(33.57)
6.3fi
(8.19)
8.64
(23.17)
Upto 3 years
8.36
5.79
10.07
4.07
4 t o 6 years
7 & more years
For Higher Studies
Reasons for
Leaving
India
4.57
(6.09)
Rs.30001to50,000
Level of
Income
Duration of
Stay Abroad
4.5
(43)
6.5
11.21
0.71
17
----
Source: Canputed fmm Survey Data

Figures in parentheses denote t o t a l mean scores of percentages.
193
cent and 12.55 per cent of the respondents who serve as

'Workers or Technicians' and as 'Businessmen or others'
respectively also avail themselves of such incentives and
concessions.
The respondents i.n higher professions
(Supervisors, Executives, Doc'tors,and Engineers) are well

aware, and avail themselves of the incentives and
concessions more than the other occupation categories of the
respondents.
S o , it can be concluded that there is some
difference between the different occupation categories of
the respondents in respect of the awareness and availing of
the incentives and concessions.
However, an insignificant
relationship is established by the computed chi-square value

(18.25) at 9 degrees of freedom at 5 per cent level.
As it is found that the level of income of the

respondents has a direct influence on the awareness and
availing of the investment facilities, an attempt has been
made to identify the relationship between the different
levels of income of the respondents and the awareness and
availing of the incentives and concessions.
It can be seen
from the table that the level of income of the respondents

has a direct influence on the awareness of the various
It is evident that the mean
scores value for the data shows that 8.24 per cent and 39.72
per cent of the respondents who come under the income groups
'upto Rs.30,000' and 'Rs.30.001 to 50,000' respectively are

aware of the incentives and concessions; the corresponding
figure for the category of 'Rs.50,001 8 above' is 52.04 per
cent.
On the other hand, the mean scores value of the data
shows that 43 per cent and 17.45 per cent of the respondents
who come under the categories of 'upto Rs.30,000' and
'Rs.30,001 to 50,000' are not aware of the incentives and
concessions; the corresponding figure for the category of
'Rs.50,001 and above' is only 10.98 per cent.
On studying the awareness pattern in relation to
different levels o f income, ~t is found that the higher
income group respondents benefit more than the other
categories.
The mean scores value of the respondents shows
that 6.09 per cent, 34.32 per cent and 59.59 per cent of
them record for the categories in the order of lower, middle
and higher level of income groups respectively.
The respondents who do not avail themselves of the
incentives and concessions record for 32.55 per cent, 32.02
So, it can be
concluded that the level of income of the respondents has a

direct influence on the awareness and the availing of the
And it is witnessed by the
computed,value of chi-square (20.32) at 6 degrees of freedom

at 5 per cent level of significance that there is a
significant relationship between the various categories Of
income levels of the respondents in respect of the awareness

and availing of the incentives and concessions.
Verification of Bypothesis
H.1. NRIs' awareness and availing of incentives and
concessions depend significantly on their education,

occupation, and level of income.
Part (a) Relationship between 'Awareness and Availing of
Incentives' and Education.
Null Hypothesis: There is no relationship between awareness,
and availing of incentives and education.
TABLE VI .5
Chi-Square Distribution for Awareness
and Availing of Incentives According to Education
Awareness
Level of
Education
Upto Matric
Availing
------------------- ------------------A
NA
AV
NAV
-14.5
4.21
Degree B PC Degree 56.14
1.29
Diploma &Technical 41.14

Degree
3.71
Table Value 18.5

Calculated Value 18.43
10.71
43
14.43
21.71
23.14
--
---
The computed value of chi-square under the said

null hypothesis is 18.43, and it is less than the table
value of chi-square at 5 per cent level of significance.
Hence, the null hypothesis is accepted.
Therefore, the
conclusion is that there is no association or relationship

between awareness and availing of incentives, and education.
Par (b) Relationship between Awareness, and Availing of
Incentives and Occupation.
Null Hypothesis: There is no relationship between awareness,
and avalling of incentives and occupation.
TABLE VI .6
and

Availing of Incentives According to Occupation
Availing
Awareness
Occupation
------------------- ------------------A
NA
AV
NAV
-Workers &
Technicians
19.93
3.36
Supervisors %
Executives
37.43
0.29
Doctors %
Engineers
30.21
0.79
~usinessme'n8
Others
24.21
4.79
10.07
11.79
-28.36
9.36
-20.64
10.36
--
Table Value 23.6

12.21
16.79
--
The computed value of chi-square for the said

null-hypothesis is 18.25, and it is found less than the
table value of chi-square at 5 per cent level of
significance.
accepted.
So the null hypothesis is statistically
Hence it can be concluded that there is no
association or relationship between awareness and availing

of incentives, and occupation.
Part (c) Relationship between Awareness, and Availing of
Incentives and Income
Null Hypothesis: There is no relationship between awareness
and availing of incentives, and income.
TABLE VI .7
and Availing of Incentives According to Income
Awareness
Level of
Income
NA
-Upto Rs.30,000
9.93
4.5
AV
NAV
-4.57
9.86
--
Rs.30,001 - 50,000 45.93

Rs.50,001 & above
Availing
------------------- -------------------
55.93
Table Value 18.5

2.5
2.21
27.57
20.86
40.57
17.57
--
--
The computed value of chi-square for the nullhypothesis is 20.32, and it is found statistically higher
than the table value of chi-;quare
significance.
at 5 per cent level of
Hence, the null-hypothesis is rejected, and
an alternative hypothesis is framed.

Alternative Hypothesis: There
is relationship
awareness,
and
incentives and
between
availing
of
income.
Therefore, the conclusion is that there is a

significant association or relationship between awareness
and availing of incentives, and income.
H.2. NRIs are aware of and avail themselves of the
incentives and concessions irrespective of their

country of residence.
Relationship between Awareness and Availing of
Incentives, and Country of Residence
Null Hypothesis: There is no relationship between Awareness
and Availing of Incentives, and Country of
Residence.
null-hypothesis is 5.44, and it is less than the table value
of chi-square at 5 per cent level of significance.

the null hypothesis is accepted.
Hence
Therefore the conclusion
TABLE VI .a
Chi-Square Distribution for Awareness and

Availing of Incentives According to Country of Residence
Availing
Awareness
Country of
Residence
------------------- ------------------A
NA
16.79
0.79
AA
17.86
2.29
AV
NAV
-13.5
4.07
13.86
6.29
---
56.86
3.43
EE
20.29
2.71
33.57
26.71
11.79
11.21
--
--
Table Value 23.6

is that there is no association or relationship between
awareness and availing of incentives, and country of
residence.
It is found that there is not much difference
between different categories of 'reasons for leaving India'
in respect of the awareness and availing of facilities.
Still an attempt has been made to understand
the
relationship between 'the reasons for leaving India' and

'awareness and availing of incentives and concessions'.
It
is understood that there is much difference between the

respondents who went abroad for 'employment purpose' and for
'any other purposes'.
It is evident that the mean scores value of the

data shows that 54.25 per cent and 10.17 per cent of the
respondents who went abroad for 'employment purposes' and
for 'any other purposes' respectively are aware of the
various incentives and concessions. However the mean scores
value shows that the respondents are almost equally
distributed in the categories of the respondents who went
abroad for 'higher studies' and those for 'business
purposes'.
The mean scores values are 15.96 per cent and
19.62 per cent respectively for the said categories.
The
mean scores values of the respondents who are unaware of

those incentives and concessions for the categories 'higher
studies', 'employment', 'business' and for 'any other
purposes' record 4.84 per cent, 10.73 per cent, 22.29 per
cent, and 33.57 per cent respectively.
It is understood
that there is much difference between the categories of 'any

other purpose' and 'higher studies' than between the
remaining categories of the respondents in respect of the
awareness of such incentives and concessions.
On studying the pattern of the availing of
incentives and concessions, it is understood that the
respondents who went abroad for 'employment purpose'
benefitted more than the other categories.
This category
alone records 55.35 per cent mean scores value.
The
respondents who went abroad for 'higher studies' and for
'business' purposes have benefited almost equally. However,

the mean scores value shows that only 8.19 per cent of the
respondents who went abroad for 'any other purposes' availed
themselves of such incentives.
On the other hand, the
respondents who went abroad for 'business' and for 'any

other purpose' are equally distributed in the availing of
such incentives.
So it can be concluded that there is not much
difference between the said categories in respect of the
However, the individual cases differ from one another in
several respects.
It is also evident from the computed
value (10.39) of chi-square at 9 degrees of freedom at 5 per

cent level of significance that there is an insignificant
relationship between the various categories of 'reasons for
leaving India' in respect of the awareness and availing of
An attempt has been made to bring out the
relationship between different durations of stay abroad, and
awareness and availing of incentives and concessions.
It is
found that there is not much difference between the two

categories of "longer duration, viz.,
'4 to 6 years', and
'7 and mare years', of stay abroad" in respect of the

awareness and availing of incentives and concessions. It is
evident from the mean scores values of the data that 48.19
per cent and 43.44 per cent of them who stay abroad for ' 4
to 6 years' and ' 7 & more years' respectively are aware of
such incentives and concessions; the corresponding figure
for the category 'upto 3 years' records only 8.37 per cent.
The mean scores values of the respondents who are
not aware of such incentives and concessions record 41.31
per cent, 1 8 . 4 3 per cent and 11.7 per cent for the
categories of 'upto 3 years', ' 4 to 6 years' and '7 & more
years' respectively.
On studying the pattern of the availing of such
incentives and concessions, it is found that the,respondents
for the two categories of 'longer duration' are almost
equally benefited of such incentives and concessions
irrespective of their duration of stay abroad.
The mean
scores value for the said categories respectively are 8.54

per cent, 4 4 . 3 1 per cent and 46.91 per cent.
ilowever, the
categories of respondents who do not avail themselves of

such incentives and concessions differ from one another. It
is seen from the table that the mean scores values for the
categories of 'upto 3 years' and ' 4 to 6 years' are 30.68
On the otherhand,
the mean scores value for the category of '7 & more years'
is only 25138 per cent.
It means that the 'duration of stay
abroad' has a direct influence on the awareness and availing
of such incentives and concessions.
However, it is found from the computed value

(13.22) Of chi-square (at 6 degrees of freedom at 5 per cent
level of significance) that there is an insignificant

relationship between the different categories of 'duration
of stay abroad' of the respondents in respect of the
awareness and availing of such incentives and concessions.
CEAPTER VIJ
INVBSTYEN'C PATTERN
Am IMPACT OF INCENTIVES
Introduction
The previous chapter dealt with the analysis
relating to the awareness and the actual availing of the
facilities, incentives and concessions by the NKI investors.
In this chapter an attempt is made to study the Investment
pattern of the NRI.investors, and the impact of the
incentives and concessions on bank deposit investments.
This chapter is divided into two parts as 'Part I'
and 'Part 1 1 ' .
'Part I' deals with analysis in respect of
investment pattern of the reslpondents,whereas, 'part 11'

analyses the impact of the incentives and concessions
meaningfully.
PART I: Investment Pattern
Investment Pattern in Bank Deposits

In tnis section an attempt is made to study the
investment pattern of the respondents in Bank Account
Deposits.
For this purpose, variables such as country of
residence, religion, age, education, occupation, income,

size and type of the fnmily have been taken into account.
For the purpose of analysis, percentages, mean scores, and
chi-square test, etc., have been computed and used.
As stated in Chapter V I , the countries of
residence of the respondents have been grouped into four
major categories as
A,
AA, E, and EE.
It is evident from
table VII.l that the mean scores value of the data shows
27.91 per cent each of the respondents, who come under the
category of 'A' group countries, invest 'Rs.50,OOl to
70,000' in bank deposits.
While the majority of the
respondents (41.03 per cent) who stay in ' A A ' group

countries invest 'Rs.30,001 to 50,000' in bank accounts, a
majority of the respondents who belong to 'E' group
countries invest only 'upto Rs.30,0001 in bank accounts. On
the other hand, 35.09 per cent (mean scores) of the
respondents who reside in 'EE' group countries invest
amounts somewhere between 'Rs.30,001 to 50,000'. So, it can
be concluded that the country o f residence of the
respondents has a direct influence on investments in
bank
account depos'its in India. The computed value of chi-square

(206.59) at 9 degrees of freedom at 5 per cent level also
supports the view that there is a significant relationship
between the country of residence of the respondents and the
investment in bank account deposits in India.
1m.E VII.1
Ill-t
Pattm in Int kEnat w i t s M i a p t
a CMky of
b i b r e , Rliqim, hp &up, Lml of *atim
md m t i m
Varlabler
Slze of I n v c r t p n t
I
I
j: up t o
~s.SO,@X~trr'50:000
'RE 30 OOI IR5.50
j t o 7 0W1
: ~j: RE
L ;hove
70 OOlj;
#-,-,
I
I
4.5
I 120.93)
\ 5
j
: (23.2hl :
6
(27.911
I RA
I 4
I (M.511
2.5
(12.821
I E
I 20
I (33.531
18
(27.481
19.5
j (14.51
I EE
4
i (14.041
I0
(35.W1
: 5.5
j (19.331
Carntry
I H~ndu
I
I
IrUsllm
I Rellgrm
I 51kh
9.75
j 4
5.84
127.051
3.5
8
135.411
7.84
1 134.711
: 133.971 : (22.521 :
(19.491
I up to l t r t r ~ cl
5.h7
I
I (34.53)
I
I Degreesand / 15.5
j PG Degrees : (22.191
I D ~ p l m a s m d : 11.17
I Tech. Oegreesj (23.431
I
I 20.25
j (42.481
:-'
8.25
(50.24)
I 30
I 17.46
j (42.961 j
9.25
j
;
j
2
(9.791
j
j
(14.121
7.25
(23.261
'
: (9.741
I 1.5
j (9.141
j 11
;: (19.101
13.34
: (15.751
j
: l19.101 :
I 7.75
j (37.951
I Superv~sorsk j
! 12.84
8
I
: 123.411 : 04.591 j
/ 7.5 j 6
/
l Busi~seenL j
I Othlllrs
I2
121.881
17
I
7.17
: 1231
-I-~-~-~-
I 117.651
I
j 12.25
(40.901
20.17
I Uorkers and ' 10.67

I Techn~c~ans 152.251
!E x ~ u t ~ v e s
i Ooctws m d j
I Enqlneerr
10
j 5.77
; (43.31) ;
-,
I
I
I
I 4.11
j (6.091 j
, - , - I - ,
12
143.371 j
: IY.991 : 119.831 1
\ 4.5 j 2.25 1
,
-I
: 112.651 :
b.92
I I6
j
119.831
6.34
(27.461
8.8
123.351
,
,
I 5.65
; 117.711 j
I 46 k above
I 2.75
j (12.171
3.5
I 36 to 45
I
Occuprtlm
10
I 5.4
(46.321 j
I
I Rge Group
I
I
I
I
j6.98
1 125.911
7.17
1; (L8.071
5
I 16.30
: (16.211 : (10.421 :
(25.951
; (34.921 ; (14.331 ; (25.071 ;
[upto35
I Level
I
of
I Educatlm
I
9
I 7.13
(3l.581 j
,-;-;
j 17
2.25
5.38
7.17
(25.681
:
j
j
j
14.75
5
j 2.01
(25.641 :
118
j 16.38
(27.481
22.25
- I
I
I
SCO~YI
6
127.911
I 11.5
I (17.561
f
Chrtstlan
8
: (41.031
j1
I
I
I
I
I
I
I R
I
of
I Resldmce
I
Total
lkm
7
I 11.92
114.681 j
--
I 5.11
22
1
(40.121 \
12
128.241
(
4
13.71
10.65
I
4
I 7.79
(12.831 \
I
I
An attempt has also been made to identify the

relationship between the categories of religion of the
respondents in respect of investments in bank accounts. The
mean scores value of the data -fiide table VII.l)
reveals
that a population of 33.97 per cent, 34.92 per cent and

35.41 per cent of the respondents of the 'Hindu', 'Muslim',
and 'Sikh' categories respectively invest 'Rs.30,OOl to
50,000 in bank deposits, whereas, the respondents who belong
to the 'Christinn' category invest higher amounts of
'Rs.70,001 and above'. It alone accounts for 46.32 per cent
of the religion category.
So, it is identified that there
is a direct effect of religion of the respondents in

investing the quantum of money in bank account deposits.
The computed value of chi-square (113.07) also supports the
inference at 9 degrees of freedom at 5 per cent level that
there is significant relationship between religion and
investment in bank deposits.
It is found (vide table VII.l)
that there is a
significant relationship between the categories of age

groups and investment in bank deposits.
A majority of the
respondents (mean scores value of 43.37 per cent and 43.31

per cent) who come under age group categories of 'upto 35'
and '46 and above' respectively invest 'Rs.70,000 and
above'. The mean scores value shows that 36.99 per cent
(majority) of the respondents who come under the category of
'36 to 45' invest 'Rs.30,001 to 50,000' only.
The
calculated value of chi-square (143.79) at 6 degrees of

freedom at 5 per cent level also proves that there is a
significant relationship between age-group categories and
investment in bank account deposits.
It is also observed from the table that there is a
significant relationship between the categories of different
levels of education of the respondents and investment in
bank account deposits.
The mean scores value of the data
shows that a population of 50.24 per cent, and 42.48 per

cent of the respondents with the levels of education 'upto
Matric', and
'Diploma and Technical Degree' respectively
invest 'Rs.3,0001 to 50,000', whereas, 42.96 per cent of

them who have studied upto 'Degree and PG Degree' invest
'Rs.70,001 and above' in bank account deposits.
The
computed value of chi-square (323.59) also proves that there

is a significant relationship between the categories of
different levels of education of the respondents and
investment in bank deposits in India.
The occupation-wise categories of respondents
reveals that there is a significant difference of
relationship in investments in bank deposits in India.
The
mean scores value of the data shows that 52.25 per cent of
the respondents who are either 'workers or technicians'
invest amounts 'upto Rs.30,0001 only whereas, 40.12 per cent
of the respondents (majority) who are in service in the
cadre of 'supervisors or executives' invest 'Rs.70,001 and

above'.
On the other hand, 40 per cent of the respondents
who are either 'doctors or engineers' invest ' u p to

Rs.30,000'; the corresponding figure for the category of
'businessmen and others' (40.9 per cent) is 'Rs. 30,001 to
50,000'.
So, it can be concluded that there is a
significant relationship between the different categories of

occupation of the respondents, and investment in bank
deposits.
Investment pattern of NRIs in Bank Deposits According to

Level of Income. Type and size of the Family
The income of the respondents is a main factor
that contributes to the growth of savings and investments.
It is inferred from the table VII.2 that there is a
significant relationship between the categories of income
level of the respondents and investment in bank deposits.
It is evident from the mean scores value of the data that a
population of 78.89 per cent, 23.13 per cent, and 27.88 per
cent of the respondents invest amounts 'upto Rs.30,000' in
bank account deposits.
It is observed from the table that there is a
significant relntionship between the categories of family
type of the respondents and investment in bank deposits.
The mean scores value of the data shows that a population of

49.49 per cent of the respondents who live in 'Joint family'
Inm-t
Variables
I
lUpt0Rs.30,OOOl
Level
of
Incnue
Type
of
Family
I
1
I
I
Size
of
Fan~lv
a,
R t k m in Pnt. miti kcordig to Lml of

T y p d S i n of Fmily
Size of Investlent
I
I
I
1
I
1 up to
IRs.30,WI IRs.50,WI I Rs.70,WlI
I Rs.30,000Ito 50,000 :to 70,000 I h above i
I
I 2.5
1
I121.11ll
I
I
IRs.M,Wl to 1 12.84
I 14.17
1
I
50,MH)I 123.131 1 (25.53) I
I
I
I
IHs.50,Wlk
120.33
121.34
1
above 1 (27.a) I (29.26) I
1
:
I
I
1
I
lhclear
I 16.17
I 32.5
I
i
1 (15.621 1 (31.391 :
9.34
1178.89)
11.5
(20.72)
I
I
Total
I
1
Scores I
km
I
1
2.96
17
1 11.08
(30.631 1
I
10.25
1 21
I 10.23
II4.061 1 128.801 1
1
1
26.00
I 28
I 25.89
(25.961 1 (27.04) I
IJo~nt
ll6.17
15.5
1 (49.49) I (lb.04l
I
14tob
I 13
I 122.bll
I
I7 and above
I I6
1 ISb.141
I
I
I
13.06)
1 I
I (27.83)
I
1 10.5
1 2
1 (36.041 1 1 7.02)
1
1
I 21.5
I (37.391
G a u ~ c rCaputed f r w Survey Data.

Flguns i n Parentheso5 h a t e P e ~ m t q e sto k m Scores
10
18.17
I (3O.hll I
7
I 14.38
112.17) I
I
1
I 7.15
I
1
I
I
I
1
I
invest 'upto Rs.30,000', whereas, a majority of the 'nuclear

family' type invest amounts 'Rs.30,001 to 50,000' in bank
deposits in India.
The computed value of chi-square
(149.47) at 3 degrees of freedoe- at 5 per cent level also

supports the significant relationship between the categories
of family type of the respondents and investment in bank
account deposits.
The 'size of the family' has direct influence on
the investment pattern in bank deposits.
The mean scores
value of the data shows that 47.08 per cent of the

respondents who live in a family of size 'upto 3' invest
'Rs.70,001 and above' in bank deposits.
On the other hand,
the mean scores value of the data reveals that 56.14 per
cent of the respondents of the family size '7 and above'
invest 'upto Rs.30,000', whereas the corresponding figure
for the category of family size 'upto 3' is only 17.98 per
cent.
So, it can be concluded that there is a significant
relationship between the categories of 'family size' of the

respondents and investment in bank deposits.
Investment Pattern in Direct Investment Schemes

In this section an analysis relating to investment
pattern of the NRI respondents in direct investment schemes
is made using personal variables of the respondents.
Investment pattern of NRIB in Direct Investment Schemes

A ~ ~ r d i ato
g Country of Residence, Religion, Age group, and
Occupation.
'The country of residence1-wise distribution of
investment pattern in direct investment
presented in table VII.3.
schemes are
The mean scores value reveals
that 57.5 per cent and 30 per cent of the respondents who
Stay in
'A'
group countries and 'EE' group countries
respectively invest 'upto Rs.15,000' in direct investment

schemes, whereas, 18.18 per cent and 48.79 per cent of them
who reside in 'AA' group countries and 'E' group countries
respectively invest 'Rs.25,001 and above' in direct
investment schemes.
S o , it is found that there are
significant differences of relationship between the 'country

of residence' groups and investment in direct investment
schemes. However, the computed value of chi-square (17.09)
at 6 degrees of freedom at
per cent level proves that
there is an insignificant relationship between the 'country

of residence' groups of the respondents and investment in
direct investment schemes.
The significant differences of relationship is
found in 'religion' groups of the respondents in investment
pattern in direct investment schemes. The mean scores value
of the data reveals that 49.42 per cent and 27.27 per cent
of the 'Hindu' and 'Muslim' respondents respectively invest
'up to Rs.15,000 in direct investment schemes, whereas, the
TABLE VIi.3
Inv@8tnlnt Pattern in Direct Investment Scheme8 Aocordlng to
Country of Rssldencs, Religion, Age Croup and Occupation
Slze of Investment
Variables
1 6.5
1(59.09)
: E
6.5
1 131.7)
! AA
Country
of
Residence
Religion
: Hindu
""'"'
1 14
: Muslim
1
I Christian
:36to45
Ale Croup
1 46 & above
1 Ucrkers and
1 Technicians
:
Occupation
I
I Doctors and
'1 Engineers
2.5
: (22.731 :(16.181
1
3.67
4
1 10
:
(19.51) 1 (46.79) ;
6.83
9.44
5.33
Total
Mean
Scores
1.5
1(27.27)
1
1 3
1
118.181 1 (54.55) 1
1.83
1 2
:128.57)
1 3
: 2
1
1 (42.661 1 (28.57) 1
2.33
111
1t37.5)
5.33
1 13
1
(16.17) 1 (44.32) 1
9.78
1
1
4.76
1.17
1 7.33
1 151.151
:
1 2.5
1 (71.43)
Suporvlsors k :
: Executives
:Rs.l5,001 :Rs.25,001 1
: Rs.15.000:to 25.000 : k above I
1 up to
5
1 2
(34.89) 1 (13.961
:
1
1
1
: 1 (28.571 1
-
! (35.301
1 Businessmen k : 8.5
I Others
1 (62.961
:
:
7.56
1
1
5.33
1 2
147.04) : (17.661
3.78
: 2
3
(22.22) 1 (14.821
4.5
Sourost Coaputed froa Survey Data

Flgures Ln Parentheses Denote Parcentasea to Mean Scores
214
'
2.67
1 13
(11.76) 1 (57.34)
1
7
(30.86) I
: 4
1
1
corresponding figure for 'Christian' and 'Sikh and other'

Categories o f religion are 28.5 and 30.88 per cent
respectively. The computed value of chi-square (33.95) at 6
degrees of freedom at 5 per cent level also supports the
inference that there is a significant relationship between
the categories of 'religion' groups of the respondents and
investment in direct investment schemes.
The mean scores value of the data reveals that
44.92 per cent, and 37.5 per cent of the respondents in the
age group 'up to 35', and '36 to 45' invest 'upto Rs.15,000'
in direct investment schemes.
The computed value of chi-
square (88.12) also reveals that there is a significant

relationship between the categories of age groups of the
respondents and investment in direct investment schemes.
The occupation-wise analysis reveals that there is a
significant difference of relationship between
the
categories of occupation of the respondents and investment

in direct investment schemes. The mean scores value of data
shows that 71.43 per cent of the respondents who serve as
'worker or technician' invest 'upto Rs.15,000', whereas, the
corresponding figure for the category of 'Supervisors and
Executives' is 30.88 per cent.
On the other hand, while
57.34 per cent of the said preceding category of the
respondents,invest 'Rs.25,001 and above', the corresponding

figure shows no respondents for the category of 'workers and
technicians'.
Investment pattern of NRIs in Direct Investment Schemes

According to Level of Income, kype and Size of the Family
It is inferred from the table VII.4 that there is

a significant relationship between the categories of income
level of the respondents and investment in direct investment
schemes. The mean scores value of data reveals that all the
respondents who come under the category of income level
'upto Hs.30,000' invest 'upto Rs.15,000' only in direct
investment schemes; 41.84 per cent, and 38.37 per cent of
them who come under the categories of income level
'Rs.30,001 to 50,000' and 'Rs.50,001 and above' respectively
invest 'Rs.25,001 and above' in direct investment schemes.
This shows the influence of income of the respondents on
direct investment schemes.
A significant relationship between the categories
of 'family type' of the respondents and investment in direct

investment schemes is also recorded.
The mean scores value
of the data shows that 29.51 per cent and 74.98 per cent of
the respondents who live in 'nuclear family' and 'joint
family' types respectively invest 'upto Rs.15,000' in direct
investment schemes; 45.71 per cent and 9.37 per cent of them
of the 'nuclear' and 'joint' family types respectively
invest 'Rs.25,001 and above' in the schemes.
Hence, it can
be found that the 'type of family' has direct influence on

the investment pattern in direct investment schemes.
The
computed value of chi-square (38.72) at 2 degrees of freedom
Invrstmmnt Pattarn in Dlrect lnvmstmant Schmmms According to

Lmvsl of Incoma, Type and Sir# of the Faally
Slzeoflnvestment
Variables
; _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ - - - - - - - - - - -1 - -
:upto
1Rs.15,001 1Rs.25,001 I
1 Rs.15,0001to 25,000 1 L above I
I
1
1
Level
of
Income
1Rs.30,OOlto 1
3.67
1
50.000
1(25.591
: 12
I
I
Family
1 11
5.67
1 (19.78) 1 (38.371
141.861
1
'
Type
4.78
9.56
I
I
I
IRs. 50,001 L
1
above
1
6
4.67
1 (32.57) i(41.841
1
Total
Mean
Scores
'
'
1 Nuclear
1 (29.511
1 Jolnt
I
8
1 174.981
1
1.67
1
1
1 (15.65) 1 (9.371
'
'
10.33
8.67
(24.771
16
1
1 (45.71) 1
1
'
11.87
3.56
Of
: upto 3
I
i
Sir0 Of
Family
1
1 4 to 6
17Labove
'
I
'
1
6.33
1
6.5
1
5
1
1 (35.501 1 (36.461 1 (28.041 1
5.94
8.44
1.67
1 11.33
I
3
1 11
1
1 (44.73) I 111.84) 1 (43.431 1
1
1
I (20)
1
1 3
I I601
'
"
"
1
1
I (201
'
Source: Coaputed from Survey Data

Flgurer in Parentheses Denote,Percentager to Mean Scores
1
1
at 5 per cent level also proves that there is a significant

relationship between the categories of 'family type' of the
respondents and investment in direct investment schemes.
The mean scores value of the data shows that 36.46
per cent and 60 per cent of them of 'family size' of 'upto
3 ' , and '7 and above' invest 'Rs.15,001 to 25,000' in direct
investment schemes.
It is also supported by the computed
value of chi-square (98.72) at 4 degrees of freedom at 5 per

cent level.
Therefore, it can be concluded that there is a
significant relationship between the categories of 'family

size' of the respondents and investment in direct investment
schemes.
Investment Pattern in Portfolio Investment Schemes

This section of the chapter deals with the
analysis of the investment pattern of the respondents in
portfolio investment schemes.
Investment pattern of NRIs in Portfolio Investment Schemes

according to Country of Residence. Religion, Age Group,
Level of Education and Occupation
As it is found in the preceding sections of the
chapter that there is a significant difference of
relationship between the 'country of residence' groups of
the respondents and investment in bank accounts, and in
direct investment schemes, an attempt has been made to study
the relationship between the 'country of residence' groups

of the respondents, and the investment pattern in portfolio
investment schemes. The data relating to investment pattern
in portfolio investment schemes according to country of
residence of the respondents are presented in table VII.5.
It is observed from the analysis that there is a significant
relationship between the 'country of residence' groups of
the respondents and investment in portfolio investment
schcmcs.
The mcnn scores value of the datn shows that 50
per cent, and 31.03 per cent of the respondents who reside
in
'A'
group countries, and
' A A ' Troup countries
respectively invest 'upto Rs.5,000'; 32.14 per cent, and

62.07 per cent of them who stay in the said group
countries
respectively invest 'Rs.5,001 to 10,000' in portfolio

investment schemes. So, it can be concluded that there is a
significant difference of relationship between the 'country
of residence' groups of the respondents and investment in
portfolio investment schemes.
It is understood from the table that there is a
significant relationship between the 'religion groups' of
the respondents and investment in portfolio investment
schcmcs. The mcan scores value of the data shows that 53.85
per cent and 31.82 per cent of the respondents who come
under the religion categories of 'Hindu' and
'Christian'
respectively invest 'upto Rs.5,0001; the mean scores value

shows that 3.84 per cent and 16.67 per cent of them who
TABLE V11.5
Inveltmeflt Pattern In Porlollo Investment Soh.mes Accordln to
country of Rssldance, Rsliglon, Age Croup, Level at Education and $ccup.tion
Variables
Size of Investment
1
: - - - - - - - - _ _ _ _ _ _ _ _ _ _ _ - - - - - -1 - - -Total
---I up to
'RS 5001
:RS 10 001 '
noan
1 Rs.5,000 jto'10,000 j ~'abbve
Scores
- 3
country
of
Residence
1
i
1 AA
1 4.5
1131.03)
1 8.5
1141.46)
Age Group
Level
of
! Education
Occupntlon
1 4.5
j132.141
;117.861
4.67
1 9
j162.071
4.83
1 I1
16.83
j153.661
j (6.9)
/ I 4.88)
1 Hindu
1153.85)
;(42.311
;(
3.84)
I nuslim
3
1150)
1 2
j133.33)
1 1
j116.671
j Christian
3.5
,131.82)
1 5
jl45.45)
12.5
jl22.73)
13.67
1 Sikh
12.5
1133.331
j 3
1 2
jl26.671
12.5
I 6
1(60)
;I401
j
j
1upto35
/1i57.14)
4 / 1 j j(14.29)
~ i
: (28.57)
136to45
17.5
1C35.711
1 1 1
jl52.38)
12.5
1 1 9 1
1 7
146Labove
111.5
1158.971
1 3
jl15.38)
I 5
j125.641
6.5
083
18.33
/-;--7--
1 up to flatrlc j
,I
1
I Degrees and j 16
1 PC Degrees
;(64)
I
I Diplomas and 1 4.5
1 Tech. Degressjl25.711
I or B P S an '
\ I /
I yeckniclan; \15:::61
i
I
1 4
1 3.33
j
j 1140)
j
1
/ 1 4 \8.67
1
I \
1 EE
Religion
11501
1 - 1
2.5
j
- I
I A
-:
I
I
I
1 10
1157.14)
1 11.5
j(57.50)
4.5
; 118)
1 3
5.83
:122.22)
1.5
jl22.221
19.5
jl57.581
2
;(12,121
15.5
4
jl20)
14.5
j(22.51
1
16.67
1 1
j(20)
'
j(17.14)
dueinesseen ki 4
1 Others
jI80)
I
- /
14.5
j 1181
~uperviscrsL I 5
/130.30)
I Executives
1
IDoctorsand
1 Engineers
2.33
"
--
'
Source: Con uted from Survey Data

F1gur.r
In Parentheses Denote Percentages to Hean Scores
j
j
11.67
belong to the said religion categories respectively invest

'Rs.10,001 and above' in the portfolio investment schemes.
It is also statistically proved by the computed value of
chi-square (45.11) at 6 degrees of freedom at 5 per cent
level that there is a significant relationship between them.
per cent nnd 52.38 per cent of the respondents who come
under the age group categories of 'upto 35 years' and '36 to
45 years' respectively invest 'Rs.5,001 to 10,000'; the mean
scores value shows that 28.57 per cent and 11.91 per cent of
the respondents who belong to the said age categories
respectively invest 'Rs.10,001 and above' in the portfolio
investment schemes. Hence, it is understood that there is a
significant relationship between the categories of age group
of the respondents and investment in portfolio investment
schemes.
It is also proved statistically by the computed
value of chi-square (105.47) at 4 degrees of freedom at 5

per cent level.
The level of education of the respondents has
direct influence in the investment pattern in portfolio
investment schemes.
The mean scores value of data reveals
that all of the respondents who have studied 'upto Matric',

invest only 'upto Rs.5,0001.
The mean scores value shows
that 18 per cent and 17.14 per cent of the respondents who
have studied upto 'Degree and PC Degree', and 'Diploma and
Technical Degree' respectively invest 'Rs.5,001 to 10,000'

in the portfolio investment schemes.
Therefore it can be
concluded that there is a significant relationship between

the education categories of the respondents and investment
in portfolio investment schemes.
analysis that there is a significant difference of

relationship between the occupation categories of the
respondents and investment pattern.
The mean scores value
of the data reveals that 55.56 per cent of the respondents

who serve as 'worker or technician' invest 'upto Rs.5,000'.
While 57.58 per cent of them who serve as 'supervisor or
executive' invest 'Rs.5001 to 10,000', the corresponding
figure for the category of 'businessmen and others' account
for 20 per cent only. So, it can be concluded that there is
a significant relationship between the occupation categories
of the respondents and investment in portfolio investment
schemes.
Verification of Hypothesis
H.3
NRIs prefer to invest in bank accounts rather than

investing in corporate securities irrespective of
I
their country of residence, and religion.

Part ( I ) Relationship between preference of bank investment,
and corporate securities and country of residence.
Null Hypothesis: There is no relationship between preference

of
bank
investment, and
corporate
securities and country of residence.
TABLE VII.6
Chi-Square Distribution for Preference of Investments
in Bank Deposits and Portfolio Investments
According to Country of Residence
Bank Deposit
Portfolio
Investment
5.38
4.67
AA
2.01
4.83
16.38
6.83
EE
7.13
3.33
Table Value 12.8

Calculated value 4.23
The computed value of chi-square for the null hypothesis is
4.23, and it is found to be proved statistically less than
the table value of chi-square at 5 per cent level of

significance. Hence the null hypothesis is accepted.
So,
it can be concluded that there is no association or

relationship between preference of investment in bank
deposits, and portfolio investments and country of
residence.
Part (b) Relationship between preference for bank deposit,

and corporate securities and religion
Null Ilypothesis: There is no relationship between preference
for bank deposits, and corporate securities
and religion
TABLE VII.7
in Bank Deposits and Portfolio Investments
According to Religion
Religion
Bank Deposit
Portfolio
Investment
Hindu
Muslim
Christian
Sikh
Table Value 12.8

Calculated value 0.74
The computed value of chi-square for the said nullhypothesis is 0.74, and it is found less than the table
Hence the null hypothesis is accepted, and therefore, it can
be concluded that there is no association or relationship
between preference for investment in bank deposits, and
portfolio investments and religion.
IIIvestlent Pattern of NRIs in Portfolio Investment Schemes

According to Level of Income; Type and Size of the Family
Data are given in table VII.8 relate to investment
pattern in portfolio investment schemes according to the
income level of the respondents.
table that there is a sizeable and significant relationship

between the categories of 'income level' of the respondents
and investment in portfolio investment schemes.
The mean
scores value of the data shows that 66.67 per cent, and
17.65 per cent of the respondents who come under the
categories of income level 'upto Rs. 30,000b,and 'Rs.30,001
to 50,000' respectively invest 'Rs.5,001 to 10,000'; the
corresponding figure for the category of income level
'Rs.50,001 and above' is only 38 per cent.
On the other hand, the mean scores value shows
that while 14 per cent of the respondents who come under the
category of income level 'Rs.50,001 and above' invest
'Rs.10,001 and above', the corresponding figure for the
category of income level 'upto Rs.30,0001 is nil.
This
shows the influence of income of the respondents in

investing portfolio
investment schemes.
S o , i t can be concluded
that there
is a
significant relationship between the categories of income

lcvel o f the respondents nnd investment in portfolio
investment schemes.
It is proved statistically that there
Inventmant Pattarn in Portfolio Investment

scheme^ According to Lava1 of Income,
Type and Sizn of the Family
Varlables
Size of Investment
/up
Level
of
Income
I
I
i
IRs.30,001 to
I
50,000
1
IRs.50,001 L
above
9
(52.94)
/
/
!Nuclear
TzFe
Faally
I upto 3
1
Slze of
Fanlly
1
1
5
1(29.41)
1
3.5
! (14)
9.5
!(381
- 3 - 8
16
1 (47.76)
1 Joint
1
1
1 3
j117.65)
12
- 8
o o
! (48)
' s
12.5
/(37.31)
7
1 2
j(20)
; _ _ _ 1 - 1 1 (70)
8.33
11.17
3.33
1
(10)
1-1
2.5
;(15.15)
1
6.06)
5.5
2.5
111.63)
7.17
3
(46.16)
/ 4 t o 6
7.5
1 (34.88)
/; ( 511.5
3.49)
1 7 L above
j
,
/; ( 1 5I . 3 8 )
'
Sourcer Con uted from Surve Data

Filures In parentheses
Percentages to Mean Scores
f en ore
5.87
/
/
2.5
(38.46)
j (14.93)
i 13
1 (78.79)
Total
flean
Scores
1
1
I
2.17
'
is a Significant relationship between the categories of

'family type' of the respondents and investment in portfolio
investment schemes.
The computed value of chi-square is
19.03 at 2 degrees of freedom at 5 per cent level of

significance.
per cent and 70 per cent of them who live in 'nuclear' and
'joint' families respectively do invest 'upto Rs.5,0001.
The mean scores value reveals that 14.93 per cent and 10 per
cent of them who belong to 'nuclear', and 'joint' families
invest
schemes.
'Rs.10,001 and above' in portfolio investment

Therefore, it can be concluded that there is a
significant relationship between the categories of 'family

type' o f the respondents and investment in portfolio
investment schemes.
It is proved statistically that there is a
significant relationship among the categories of
'family
size' in investment pattern in bank account deposits and in

direct investment schemes. Here an attempt has been made to
find out the relationship between the categories of 'family
size' o f the respondents and investment in portfolio
investment schemes. The mean scores value of the data shows
who belong to family size of 'upto 3 ' , and '7 and above'
respectively invest 'upto Rs.5,0001; on the other hand, it
shows that 6.06 per cent and 46.16 per cent of them who
belong to the said categories of 'family size' respectively
invest
schemes.
'Hs.10,001 and above' in portfolio investment

llence it can be said that there is a significant
relationship between the categories of 'family size' of the

respondents and investment in portfolio investment schemes.
It is also supported statistically by the computed value of
chi-square (19.77) at 4 degrees of freedom at 5 per cent
level.
Verification of nypothcsis
A.4
NRIs prefer direct investment to portfolio investment

irrespective of their country of residence, occupation
and level of income.
Part (a)
Relationship between preference of Investment and

Country of Residence.
of investment and country of residence.

null-hypothesis is 0.11, and it is found less than.the table
Hence the null hypothesis is accepted.
So, it can be
concluded that there is no association or relationship

between preference for investments and country of residence.
TABLE VI I .9
Cbi-Square Distribution for Preference of Investments
According to Country o f Residence
Direct
Portfolio
AA
3.67
6.83
EE
3.33
Table Value 12.8

Part (b)
Relationship between preference for Investment and

Occupation

for investment and occupation
Since the computed value of chi-square for the

null hypothesis is found less than the table value of chisquare ( 2 . 3 8 ) at 5 per cent level of significance, it is
statistically proved to be accepted.
So, it can be
concluded that there is no association or relationship

between preference for investments and occupation.
TABLE VII.10
Chi-square Distribution for Preference of Investments

According to Occupation
I
Occupation
Direct
Investment
Workers & Technicians

Supervisors & Executives
Doctors & Eng~nccrs
/
1
1
1.17
7.56
3.78
Businessmen & Others
4.5
Portfolio
Investment
1
1
/
1
1.5
5.5
6.67
1.67
Table Value 12.8

Part (C) Helationshlp between preference for Investment and
lncome
for investment and income
TABLE IVII.11
According to Income
Level of Income
Direct
Investment
Portfolio
Investment
0.89
Rs.30,001 to 50,000
4.78
5.67
Rs.50,001 & above
9.56
11.33
Upto Hs.30,000
Table Value 10.6

The computed value of chi-square for the said nullhypothesis is 0.57, and it is found less than the table
Hence the null hypothesis is accepted.
Therefore, the
conclusion is that there is no association or relationship

between preference for investments and level of income.
PART I 1 : Impact of Incentives on Bank Deposits of NRI

Investors
As a part of the Governmental policy towards the
development point of view of the country some tax incentives
and concessions have been provided.
set procedural
Further, the GO1 has
rules for implementation of various
incentives admissible under the schemes. The data collected

about the impuct of these incentives and concessions on the
NRI investment in bank deposits are analysed and presented
in the following paragraphs.
Impact of Incentives on Investment in Bank Acoount Deposits

According to Country of Residence, Religion, Age Group.
Level of Education, and Occupation
It is evident from the table VII.12 that a
majority of the respondents who stay in ' A ' group countries
favour FGNRINRER accounts for the 'higher interest rates and
earnings, and because gifts of these accounts are exempted
from IT, WT & GT. 28.07 per cent each of the respondents who
reside at 'EE' group countries prefer bank deposits mainly

due to the incentives given such as 'local payments can be
easily debited to NREH account, special series of cheque',
and 'currency conversion facilities are available in NREH
account, and risk of exchange loss is protected in FCNN
accounts'.
However, it is proved statistically by the

at 5 per cent level that there is an insignificant
relationship between the country of residence' of the
respondents and impact of incentives on bank deposits.
The mean scores value of the data reveals that

almost an equal number of the majority of 'Muslim', and
'Christian' respondents invest in bank deposits mainly
because of 'higher interest rates, and that the balances,
and gifts are fully exempted from IT, WT, and G T 1 . The mean
scores value reveals that 31.69 per cent, and 36.96 per cent
of the respondents who belong to the 'Hindu', and the 'Sikh
and the other' religions prefer to invest in bank accounts
mainly for the purpose of availing the facilities of
repatriation and lonn. Ilowever, it is stntistically proved
by the com[,~~Lcdvulue of chi-squnre (6.81) at 9 degrees of
freedom at 5 per cent level that there is an insignificant
relatiohship bet een the
respondents
'religion groups' of the
1 impac.l of incentives on bank deposits.
The mean scores value of the data shows that while

16.95 per cent of the respondents who belong to the age
group category Of 'upto 35' invest in bank accounts mainly
for availing the facilities of repatriation and loan, the
corresponding figure for the age group category of '46 and
above' is 23.4 per cent only. On the other hand, a majority
of the respondents who cone under the categories of age
group 'upto 3 5 ' , and '46 and above' respectively invest in
bank accounts mainly for the purpose of 'availing the
facility of currency conversion and safeguarding their money
from the risk of exchange loss'.
It is evident from the

relationship between the categories of 'age group' of the
respondents and impact of incentives on bank deposits.
It is proved statistically that there is a
significant relationship between the categories of 'level of
education' and impact of incentives on bank deposits.
It is
witnessed from the computed value of chi-square (36.9) at 6

degrees of freedom at 5 per cent level. It is also inferred
from the table (vide table VII.12),
that the mean scores
value of the data reveals that 48.72 per cent, and 29.73 per
cent of the respondents who belong to the educational
categories of 'upto Matric', and 'Degree and PC Degree'
respectively invest in bank accounts mainly for higher
interest rates and tax relief. On the other hand, 7.69 per
cent and 2 0 . 2 7 per cent of them who belong to the said

educational categories, in the order, invest in NRER
aCC0utItS mainly for local disbursements.
So, it can be
concluded that there is a significant relationship between

the categories of 'level of education' and impact of
incentives on bank deposits.
It is further observed from the table that the
mean scores value of data shows that 42.75
27.03
per cent and
per ccnt of the respondents who serve as 'worker or
technician' or as 'doctor or engineer' respectively invest

in bank accounts because of the 'facilities of repatriation
and loan'; 25.49 per cent and 42.86 per cent of them who
belong
to the occupation categories 'Supervisors and
Engineers', and 'Businessmen and others' respectively prefer

to invest in bank accounts for the same reason referred to
above.
The computed value of chi-square ( 2 7 . 3 3 )
at 9
degrees of freedom at 5 per cent level supports a

significant relationship between the categories of
'occupation' of the respondents and impact of incentives on
bank deposits.
Impact of Incentives on Investment in Bank Account Deposits

According to Level of Income, Reasons for Leaving India,
Duration of Stay Abroad, and Type and Size of the Family
Data relating to the impact of incentives on bank

deposits according to the level of income are presented in
table VII.13.
It is observed from the table that the mean
scores value shows, 67.74 per cent and 32.23 per cent of the
respondents who come under the income categories of' 'upto
Rs.30,000' and 'Rs.30,001 to 50,000" respectively prefer to
invest in bank accounts due to 'higher interest rates, and
tax relief; the corresponding figure for thr income category
of 'Rs.50,001 and above' is only 8.7 per cent. On the other
hand, the mean scores value reveals that 12.9 per cent and
20.66 per cent of the respondents who belong to the said
level of income categories respectively like to invest in
bank accounts, mainly for availing the facilities of
'repatriation and loan'; the corresponding figure for the
income category of 'Rs.50,001 and above' records 46.38 per
cent.
It is proved statistically by the computed value of
chi-square (31.44) at 6 degrees of freedom
at 5 per cent
level that there is a significant relationship between the

categories of 'income level' of the respondents and impact
of incentives on bank deposits.
It is inferred from the table that the 'type of
family' of the respondents has a direct influence on impact
of incentives on bank deposits.
The mean scores value of
the data reveals that 20.78 per cent, and 56.41 per cent of
the respondents who belong to the 'nuclear' and 'joint'
families respectively invest in bank for higher interest
rate and full tax exemption; 14.94 per cent, and 28.21 per
cent of them who belong to the said categories of family
respectively prefer to invest in bank accounts attracted by

the facilities of 'repatriation, and loan'.
The computed
value of chi-square proves that there is a significant

relationship between the categories of 'family type' and
impact of incentives on bank deposits.
However, it is statistically proved by the
computed value of chi-square ( 1 5 . 9 9 ) at 6 degrees of freedom
relationship between the categories of 'family size' and
impact of incentives on bank deposits.
It is evident from
the table that the mean scores value of the data reveals
who live in the family size of 'upto 3', and '7 and above'
respectively prefer to invest in bank accounts for availing
the facilities of 'repatriation and loan'; 3.45 per cent and
five per cent of them who live in the said categories of
family size, in the order, desire to invest in bank accounts
for local disbursements. So, it can be concluded that there
is an insignificant relationship between the categories of
'size of the family' and impact of incentives on bank
deposits.
It is found from the analysis that there is an
insignificant relations hi^ between the categories of
'reasons for lcuving India' and impact of incentives on bank
deposits.
The mean scores value of the data shows (vide
table VII.13) that 20.69 per cent, and 20 per cent of the
respondents who went abroad for 'employment', and for
'business' respectively invest in banks mainly for higher
30 per cent, and 62.07 per
interest rate and tax relief;
cent o f the respondents who went abroad for 'higher

studies', and for 'any other purpose' respectively desire to
invest in bank account deposits mainly for the same reason
said for the above category.
However, it can be concluded
that, according to the computed value of chi-square (22.59)

at 9 degrees of freedom at 5 per cent level, there is an
insignificant
relationship
between
the categories of
'reasons for leaving India' and impact of incentives on bank

deposits.
It is inferred from the analysis that 17.02 per
cent and 37.27 per cent (mean scores) of the respondents who
reside abroad for the periods of 'upto 3 years', and '7 &
above years' respectively like to invest in bank mainly for
availing the facilities of 'repatriation and loan'; 21.28
per cent, and 20.91 per cent of them who stay abroad in the
said order periods respectively prefer to invest in bank
mainly for 'clearing local payments, and availing the
special series of cheque facility', and the corresponding
figure for the category of '4 to 6 years' duration of stay
abroad is only 13.64 per cent.
It is statistically proved
by the computed value of chi-square (7.35) at 6 degrees of

freedm at 5 per cent level that there is an insignificant
relationship between the categories of 'duration
of stay
abroad' and impact of incentives on bank deposits.

In addition, it is found from the analysis that a
majority of the respondents who invest in direct investment
schemes, portfolio investment schemes, and in government
securities, etc., prefer to invest in those schemes because
of taxation relief of investment in certain specified assets
from IT, WT, and GT, and tax-reduction on long-term capital
gains at a flat rate of 20 per cent, and elrnings on other
investment like government bonps, NSC, units of UTI, etc.,
are exempted from IT.
Verification of Hypothesis
H.5
Availing of incentives on bank deposits vary

significantly with age, education, occupation, level of
income, and country of residence.
Part (a)
Relationship between 'availing of incentives on

bank deposits' and age.
Null Hypothesis: There is no relationship between 'availing

of incentive on bank deposits' and age.
'The computed value of chi-square for the nullhypothesis is 11.5, and it is found statistically less than
the table value of chi-square at 5 per cent level of
significance.
Hence, the null hypothesis is accepted.
Therefore, the conclusion is that there is no association or

relationship between 'availing of incentives on bank
deposits' and age.
TABLE VII.14
Chi-Square Distribution for Availing of Incentives on Bank
Deposits According to Age
Age Group
Upto 35
36 to 45
36.5
21
46 % above
14
5.5
Table Value 18.5

Part (b) Relationship between 'availing of incentives on
bank deposits' and education.
of
incentives on bank deposits' and
education.
The computed value of chi-square for the nullhypothesis is 36.9, and statistically it is found higher
than the table value of chi-square at 5 per cent level of
significance. Hence, the null hypothesis is rejected and an
alternative hypothesis is framed.
TABLE VII.15
Chi-Square Distribution for Availing of Incentives on BanL
Deposits According to Education
Education
Of
Diploma &
Tech. Degree
Table Value 18.5
Alternative nypothesis: There is relationshlp between
availing of incentives on bank
deposits and education.
Therefore, the conclusion is that there is a
significant association or relationship between availing of
incentives on bank deposits and education.
Part
(c) Relationship between availing of incentives on

bank deposits and occupation.

of incentives on bank deposits' and
occupation.

null-hypothesis is 27.33, and it is higher than the table
Hence, the null hypothesis is rejected and an alternative
hypothesis is framed.
TABLE VII.16
Deposits According to Occupation
Occupation
Workers &
Technicians
Supervisors
& Executives
Doctors &
Engineers
Businessmen
8 Others
Table Value 23.6
Alternative nypothesis: There is relationship between

availing of incentives on bank
deposits and occupation.
So it can be concluded that there is a significant
association or relationship between 'availing of incentives
on bank deposits' and occupation.
Part (d)
Relationship between availing of incentives on

bank deposits and income.
Null Hypothesis: There is no revtionship between 'availing

of incentives on bank deposits' and income.
TABLE VII.17
Deposits According to InLevel of
Income
I1
I2
I3
I4
Upto Rs.
30,000
10.5
Rs.30,OOlto
50,000
19.5
12.5
13.5
15
Rs.50,001 8
above
32
13
18
Table Value 18.5

null-hypothesis is 31.44, and it is found higher than the
table value of chi-square at
per cent level of
significance. Hence, the null hypothesis is rejected and an

alternative hypothesis is framed.
Alternative Hypothesis: There
is relationship between
'availing of incentives on bank

deposits' and income.
Therefore, the conclusion is that there is an

association or relationship between 'availing of incentives
on bank deposits' and income.
Part ( e ) Relationship between availing of incentives on bank

deposits and country of residence.
Null Hypothesis: There is no relationship between ' availing
of incentives on bank deposits' and country
of residence.
TABLE VII.18

Deposits According to Country of Residence
Table Value 23.6


null-hypothesis is 10.47 and it is less than the table value
of chi-square at 5 per cent level of significance. Hence the
null hypothesis is accepted. Therefore, it can be concluded
that there is no association or relationship between
'availing of incentives on bank deposits' and country of
residence.
VIII
Introduction
The pervious chapter dealt with the analysis of
the NRI investment pattern and the impact of incentives and
concessions on the NRI investments. In fine, the summary of
findings of the study, major recommendations for the
favourable consideration of the policy makers and future
researchers, and suggestions borne of conclusions of the
present study are presented in this chapter.
In view of the adverse balance of payment

position, increasing difficulty is experienced in obtaining
concessional borrowings, and aids and grants have more and
more strings attached.
While embarking upon a rapid
economic plan, it is a matter of great importance for India

to maximise the flow of remittances from NRIs.
It is with
this view that the Government has recognised the importance
of tapping this vast reservoir of financial resources and
its wisdom, and thought of extending liberal facilities and

incentives to NRIs.
Facilities for NRIs were considerably liberalized
at the time of presentation of t%
1982-83 budget.
There
was a general liberalization in approach in 1985-86 when the

estate duty was abolished, delicensing of industries was
announced, and a three-year Export-Import Policy was
introduced.
Over the years, exchange control formalities under
Foreign Exchange Regulation Act were considerably simplified
for direct and portfolio investments. In 1988, the scope of
FCNR Account Scheme was widened by including Deutsche Mark
and Japanese Yen currencies, and also the NRI Bond was
issued.
Though the NRI policy could be traced back to the
1960s, the Government adopted a liberal policy only in
recent years for promotion of NRI investment in India.
These investment channels include bank deposits, direct
investment in industries, portfolio investment in corporate
securities, Government securities, units of UTI, etc.
With a view to attracting NRI investments, the
Government has been providing a number of special facilities
and incentives to NRIs.
Substantial relaxations were
allowed during the past eight years, and the procedures have
been simplified on both repatriation and non-repatriation

bases.
Under bank account facility NRIs are permitted to
maintain NRER, FCNR and NRO accounts.
The NRER account
enables an NRI to maintain savings, current, recurring and

term-deposit accounts designated in Indian rupees.
But the
FCNR account permits an NRI to maintain term-deposits only

designated in four foreign currencies, viz., US Dollar,
Pound Sterling, Deutsche Mark, and Japanese 'fen.
The entire credit baiance in both these accounts
including earnings is allowed to repatriate outside India at
any time. NRRR account fixed deposits of one year and above
carry an interest of two per cent higher than the rates on
domestic deposits of similar maturities.
There is no
restriction on local disbursements from the NRER account.

On the other hand, in case of FCNR account the interest
rates for various currencies and various maturity periods
are prescribed by the RBI from time to time.
The interest
depends on the currency and the period of deposit.
However,
fluctuations in the value of the Indian rupee do not affect

the NRIs.
NRIs are also allowed to maintain NRO accounts.
These are npened by NRIs prior to leaving India.
Local
rupee receipts can be credited to the account and local

payments can be made.
However, funds can not be repatriated
abroad, and the interest earned on this account is subject

to income-tax.
Corporate securities=provide a very exciting

investment option for NRIs.
For them both repatriable and
non-repatriable facilities are available in India.
Shares
can be purchased through direct subscription for new issues

or existing shares from the stock market through stock
brokers/stock exchanges.
Under direct subscription an NRI is allowed to

invest cent per cent in new issues of equitylpreference
shares and/or convertible/non-convertible debentures of
public or private limited companies or partnership or
proprietary concerns, on non-repatriation basis, except
those dealing in real estate business or deriving income
from agricultural/plantation activities.
However, on repatriation basis NRIs are allowed to

invest upto 40 per cent in new or existing Indian companies
(other than FERA companies) raising capital through
prospectus.
Such companies should be engaged in industrial
or manufacturing activities or should be in hospitals

including diagnostic centres, hotels of three to five star
category, shipping companies, companies undertaking
development of computers, software and exploration services.
In addition, NRIs are allowed to invest upto 74

per cent of equityfpreference shares and convertible
debentures, for starting any industry and expansion or
diversification thereof, provided that the industry is
covered by: (a) Appendix I to the Industrial Licensing
Policy 1973, (b) hotels of three to five star category, (c)
hospitals/diagnostic centres, (d) any other industry where a
minimum of 60 per cent of its output is exported and (e)
industry reserved for small-scale sector where the minimum
of 75 per cent of its output is exported.
Furthermore, on repatriation basis, NRIs are
allowed to make bulk investment on private placement basis
upto 100 per cent of equity capital in sick companies,
either by way of purchase of equity shares from the existing
shareholders, or in the form of subscription to new equity
issue of the sick companies.
Such bulk investments will be
permitted for repatriation only after a minimum period of

five years, on merits of individual cases after taking into
account the future payment liabilities of the sick
companies.
NRIs are also allowed to invest in free trade
zones upto 100 per cent with repatriation benefits in

respect of capital and income earned thereon.
NRIs are allowed to invest in shares and
debentures quoted on stock exchanges (portfolio investment)
in India, and such investments could be made with full
benefits of repatriation of capital investment and income

thereon or on non-repatriation basis.
If the portfolio investments are desired to be on
repatriation basis, the following conditions have to be met:
(a) purchase of shares/debentures has to be made through a
recognised stock exchange in lndia at the rates prevailing
on the floor of the stock exchange; (b) each NRI should hold
not more than one per cent of the paid up value of the
equity capital or each series of non-convertible debentures
of the company; (c) purchase of equity shares and
convertible debentures is subject to an overall ceiling of
five per cent of the company concerned, and five per cent of
the total paid-up value of each series of convertible
debentures of the company concerned. This limit of five per
cent applies to the portfolio
investments on both
repatriable and non-repatriable bases; (d) payment for such

investments has to be made by fresh remittances from abroad,
or out of funds held in the NRERIFCNR account in India.
However, if the portfolio investment is to be made
without the benefit of repatriation, then such an investment
could be made from the NRO account also.
Further an NRI
cannot hold more than one per cent shares of equity capital
and convertible debentures of the company on repatriation
basis; the NRI can, however, acquire shares in excess of one
per cent, within the overall limit of five per cent, on nonrepatriation basis.
Portfolio investment in non-convertible debentures

floated by Indian companies and Master Shares of UTI through
stock exchange is also allowed with full-benefits of
repatriation of capital and i n m e earned thereon without
any limit.
But the holding of the shares for a minimum
period of one year is required to claim repatriation

benefits.
Besides investing in shares and debentures, NRIs
are allowed to invest in company deposits, units of UTI,

Government Bonds, and other investment schemes like National
Saving Certificates, etc.
NRIs could deposit in Indian Public Limited
Companies either on repatriation or on non-repatriation
basis, provided the funds for repatriation basis investment
are made by sending remittances from aboard or from their
NRER/FCNR account.
However, ,such repatriation benefits will
be allowed only after three years. Deposits in companies on

non-repatriation basis could be made by NRIs from the NRO
account also.
The interest rates are higher than on bank
deposits because of an element of risk in case of company

failure.
The UTI provides opportunities to NRIs for
investment in several schemes.
Units can be purchased
through banks or stockholders/dealers.
The investment is
repatriable if made in foreign exchange.
Investment in
Central or State Government Securities is allowed on
repatriation as well as non-repatriation bases without any

limit.
In addition, NRIs are allowed to invest in public
sector bonds and mutual funds set up by the commercial

banks, Life Insurance Corporatiowof India, and UTI on nonrepatriation basis.
From the profile of NRI investments, it appears

that a very substantial amount of NRI funds has been
received as a short-term private capital inflow, and is
vulnerable to external exchange rate movements.
It is clear
from the foregoing observation that although substantial

facilities and incentives have been provided to the NRIs,
still the NRI investments are more in the form of bank
deposits than in the form of equity investments.
Thus,
there is a definite need to study how to attract more

enterprises in India through NRI funds.
It is observed that the NRIs lack authentic

information regarding the facilities and incentives
available to them.
They are not confident about the
stability of Indian laws both on investments and on tax.
They do not get adequate information regarding specific

projects they are interested in, and they feel that if they
were to come and stay in India for obtaining such
information, they may run into tax problems by reason of
their longer stay in India.
Also they are unable to comprehend the different

provisions with varying definitions of the same terms under
different legislations.
The NRI investment is still
regulated, and one has to go through a number of formalities

to comply with the relevant provisions of the law under
FERA, taxation, customs, and other specific laws concerning
the spheres of licensing, banking, imports, baggage rules,
etc.
On the whole, the NRI fund has been a policy
induced flow.
Although the RBI has liberalized the
facilities for investment by NRIs in shares and debentures

of Indian companies, and simplified the formalities in this
regard, it is necessary to develop the infrastructure
facilities for attracting large scale investments from NRIs.
In addition to liberalized incentives and the
facilities, it is also essential to publicize them among
NRIs, provide authentic and current information, and furnish
data required for making preliminary investment decisions.
And provide guarantee about their tenure, bring more
simplicity, certainty, and stability in the schemes, and
also to take effective steps to monitor the external
exchange rate of Indian rupee.
.Flow of NRI funds has-been steadily increasing
over the years.
NRIs have obviously shown greater interest
in NRER and FCNR bank account deposits, than in direct and
portfolio investments.
Although the NRI bank deposit has
served the objective, a part of the success is due to the

prolonged spell of a strong US $.
The sustained inflow of
funds under these schemes has pfavided considerable support

to the balance of payments during the past few years.
Though many NRIs wish to participate in the
country's industrial and economic development, very few have
actually come forward to do so, because they find irksome
bureaucratic hurdles such as inordinate delay in everything.
Government Bonds and other securities available to
NRIs for investments in India have been for long-periods,
and hence the Government can not hope to raise significant
subscriptions from NRIs because no one wants to lock up
money for such long-periods. Further most of the debentures
issued by the Indian publie limited companies and the
Government securities like the SBI bond are non-repatriable.
The outlook for
future inflow of NRI funds
appears to be rosy as the Government shows keen interest in

wooing NRI funds.
As long as the foreign currencies are
attractive in terms of exchange rates and interest rates,

NRI deposits, particularly the FCNR deposits, in future,
will continue to grow at a higher rate.
The growth of the
NRER depdsits depends on the continuation of the significant

interest rate and repatriation facility.
The NRI direct investments have not been

substantial so far, but in future these are likely to grow
to the benefit of India, as some newer
investments are
significant in terms of size and use of sophisticated

modern-technology and better management.
The growth of the NRI portfolio investments is
significantly dependent on the Indian corporate sector,
banks with foreign branches, merchant uanking agencies,
stock exchanges, and the relevant authorities concerned.
The conclusion is that the participation of NRIs
in the country's industrial establishment and production
should be encouraged, as there is immense pressure on the
foreign exchange reserves.
The country's repayment
obligation to the IMF, the hike in the international oil

price, the fall in the rate of growth of indigenous oil
production, and mounting imports, etc., are some of the
important
factors which have made NRI
investments
indispensable.
Findings
The major findings of the study are as follows:
1. The FERA classifies all persons with reference

to their residential status into two categories,
the ITA classifies persons into three categories.
whereas,
It is
observed that a person who is a resident under FERA could be

a non-resident under ITA and vice-versa.
2. From the review of the NRI
investment
opportunities and benefits attempted in the second chapter,

it is obvious that tax concessions are allowed to NRIs.
major dis-incentive was the deducation of tax at source at

high rate.
It was in practice for a long-time.
However,
the deduction of tax at source has been reduced to 20 per

cent on investment income and long-term capital gains.
3. Prom the study of the evolution of NRI
investment policy
in India, it is found that the
liberalization of the rules regarding the NRI investment is

in the right direction.
The simplification of the
procedural formalities by the RBI is a welcome step.
Also,
the opening of the gates of the investment facilities, so

far confined to individual NRIs, is now extended to
companies, partnership firms, societies, and other corporate
bodies as well as trusts; and this is of great importance.
4. It is found from the analysis in the third

chapter that the NRI deposits with banks in India support
excellent balance of payments position. It is further found
frcin the analysis that the growth rate of NRER deposit is
higher'in the initial period, and it is also found
statistically significant.
In addition, it is found that
there is a strong positive correlation between the NRER

deposit and the exchange rates for US $ and f , in terms of
Indian rupee.
5. The analysis reveals that the FCNR deposit has
grown positively to the extent of about 72 per cent in the

latter period, as against the negative growth of the deposit
in the former period of the analysis.
However, the growth
rate for the deposit is found statistically significant.

It is found that there is a strong positive
correlation between the FCNR deposit and the exchange rates
for the US $ and the British P.
The main reasons attributed
to such an enormous growth of this fund are very attractive

interest rates, appreciation of currencies in the FCNR
deposit against the Indian rupee, inclusion of the Japanese
Yen and Deutsche Mark as designated currencies, liberalized
investment climate provided by the COI, etc.
6. It is found from the currency-wise analysis of
FCNR deposlt that about 82 per cent of the deposits are in

the form of $ alone.
deposits
However, the growth rate of the FCNR
for $ and f is found statistically significant.
The correlation analysis reveals that there is a highly

positive correlation between the FCNR $ deposit and AER for
$.
he
correlation between the FCNR f deposit and AER for f
is also found to be strongly positive.
7 . The variation in the exchange rate of the
foreign currencies in terms of the Indian rupee has a direct

relationship with NRI deposits in bank accounts in India.
The regression equation fitted -for the purpose also shows
that the growth of NRER and FCNR deposits is highly
dependent on the exchange rates of $ and f.
8. There was no discrimination of interest rates
between resident accounts and NRI accounts for some years.

However, there is now a difference of interest rates between
resident and non-resident accounts at a margin of one and
two per cent respectively for FCNR and NRER deposits,
and
the growth rates for the interest rate on NRER and FCNR
deposits are found statistically significant.
9. The correlation analysis reveals that there is
a positive correlation between the $ FCNR deposit and FCNR

interest rate.
In addition, the relationship is also found
highly positive between f FCNR deposit and FCNR interest

rate.
However, a positive correlation is found between the
NRER deposit and FCNR interest rate.
In addition, the
regression analysis shows that the growth of FCNR and NRER

deposits is dependent on the interest rates on NRER and FCNR
deposits.
The growth of total deposits (FCNR and NRER) is
also found highly dependent on the $ exchange rate.
It
reveals further that the growth of NRER deposit is found

dependent on the FCNR deposit at a higher level; on the
other hand, the growth of BCNR deposit is also found to be

dependent on the growth of NRER deposit.
10. The cost benelfit analysis of NRI investment
shows that banks incur a loss -in the case of NRER deposit,
whereas for the FCNR deposit it is found that they make a
profit.
The growth of the FCNR deposits also depends on the
continuation of the differential interest rate and

repatriation facility.
11. It is observed from the analysis of the fourth
chapter that a host of incentives have been provided to NRIs

for setting up enterprises.
These include repatriation of
capital investment, and the income earned thereon to the

extent of 40 per cent of the total paid-up capital of the
project.
In addition, NRIs have been given incentives for
import of capital goods, components and raw-materials for

setting up industrial units in India.
12.
It is found that the direct investment grows
at an enormous rate. The growth rates for repatriable (40 %

and 74 % schemes), and non-repatriable direct investments
are found to be statistically significant.
13. The Industrial Sector-wise analysis of NRI
investment shows that a major portion of the NRI investment
goes to the 'Metallurgical' group of industries.
Investment
on repatriation basis has been high in Metal, Medical and
Electronic industries rather than in Glass, Photos,

Mechanical and Automobile industries.
However, on non-
repatriation basis, they prefer to invest in Electronics,

Paper and Plastic industries.
14. The State-wise analysis reveals that the NRIs
prefer to set up the industrial units in the State of

Maharashtra.
It has the highest share in
the projects
approved, followed by New Delhi.

15. The region-wise analysis of the trend of NRI
investment in industries shows that, as far as the setting
up of industrial units is concerned, the NRIs residing in
advanced countries like the USA and Canada evince more
interest than their counterparts in the Middle East and
other parts of the world.
Availability of a large domestic
market, Government's concein in protecting indigenous

production, availability of raw-materials, skilled and unskilled labour, and technical and managerial manpower are
some of the important factors which motivate the USA-and
Canada-based NRIs to participate in the industrialisation of
the country.
16. The analysis of portfolio investments by NRIs,
as seen in the fifth chapter, reveals that they prefer to

invest in shares and debentures only on repatriation basis
rather than on non-repatriation basis.
these schemes has succeeded,
The NR1,share in
and it is proved that the
growth rate for the schemes is found to be statistically

significant.
17. The analysis of capital issues to NRIs by the

Indian Joint Stock Companies reveals that the issue is
higher in case of 'bonus issues'. The rate of growth of the
capital issues is also found to be statistically significant
for 'bonus issues' and 'further issues', whereas the growth
rate for the 'initial issues', 'debenture issues' and
'loans, etc.' 1s found to be statistically insgnificant.
18. NRI investment in company deposit has been
growing considerably, and the growth rate of the deposit is

proved to be statistically significant.
It is found that
while there is a positive correlation between the company

deposit and the NRER interest rate, the relationship between
the deposit and the interest rate on FCNR deposit has a
significant negative correlation.
Also the exchange rates
of the foreign currencies has a strong positive correlation

with the NRI investment in company deposits.
As a whole it is found from the analysis that the
reasons for the poor NRI response to the portfolio
investment schemes are the following:
The NRIs are not satisfied with the services
provided by the established companies for investment.
Similarly the ceiling of one per cent and five per cent on
portfolio investments is too restrictive as to evoke any

interest.
19. The scheme-wise analysis of NRI investment in
units of UTI reveals that the NRI investment in the

available schemes under UTI has been increasing at an
enormous rate.
The growth rate for the investment in these
schemes is also found statistically significant.

20. It is found that the major source for the
investment in units of UTI has been 'transfer from NRO

account' followed by 'transfer from FCNR/NRER accounts'.
21. It is found from the analysis in chapter six
that though it is Said that NRIs from Asian countries

constitute skilled and semi-skilled workers, the sample
respondents are almost equally distributed among several
country groups.
The contribution of NRIs to India's
development has been of a varied nature.

22. Despite the observation that NRIs from the USA
and Europe are professionals and highly prosperous, it is

found that a majority of them depend on business and other
activities.
23. The socio-economic characteristics of the
sample-respondents reveal that a majority of the respondents

are employed as 'Workers and Technicians' or 'Supervisors
and Executives', and most of them belong to the 'middle age
group'.
The relationship between occupation and age is not
found to be significant.
24. According to the computed chi-square value the

impact of education on the level of income is significant.
However, the proportion of respondents is found to be
significant in respect of the religion and the occupation of
the respondents.
While it is proved that there is an
insignificant relationship between the religion and the

income, the chi-square value supports a significant
relationship between the religion and the status of the
spouses of the respondents.
25. The relationship between
'the religion' and
'the purpose of sending money to India', and 'occupation'

and 'purpose of their going abroad' are found significant.
On the otherhand, it is found that there is an insignificant
relationship between the country of residence and the
duration of abroad stay; the relationship between the
country of residence and the reasons for leaving India is
found to be significant.
26. It is found from the analysis that the country
of residence of the respondents has a direct influence on

the awareness and availing of the investment facilities and
incentives. While the religion of the respondents has less

impact on the awarreness of the investment facilities, the
influence of the religion is found to be greater on the

availing of the investment incentives.
27. While it is found that there is a significant
relationship between the 'age groups' and 'awareness and

availing of the investment facilities', the influence of the
age groups is found to be more on awareness and availing of
However the level of
education of the respondents has not much influence on the

awareness and availing of the investment facilities,
whereas
it has great influence on the awareness and
availing of the investment incentives and concessions.

28. It is found from the occupation-wise analysis
that the respondents who serve as 'Supervisors and

Executives' avail themselves of the investment such
facilities and incentives more than the other occupational
categories of the respondents.
When it is found that the
level of income of the respondents has a direct influence on

the awareness and availing of the investment facilities and
incentives, it is inferred that the respondents who went
abroad for 'employment' purpose are well aware and avail
themselves of the investment facilities and incentives.
29. It is found that the duration of stay abroad
has also-a direct influence on the awareness and availing of
the investment facilities and
concessions.
the
incentives
and
However, it is proved that there exists an
insignificant relationship between the duration of stay

abroad and the awareness and availing of such incentives and
concessions.
30. The following null hypotheses were accepted:
'There is no relationship between the awareness

and availing of incentives, and the country of residence'.
and availing of incentives, and education'.
and availing of incentives, and occupation'.
However the null hypothesis that follows is invalid.
and availing of incentives, and income'.
31.
It is inferred from the analysis in the
seventh chapter that there is a significant relationship

between the country of residence of the respondents and
investment pattern in bank deposits and in portfolio
investment schemes. An insignificant relationship is found
between the country of residence of the respondents and
investment pattern in direct investment schemes.
32.
The analysis reveals that there is a
significant relationship between the categories of religion,
and age groups of the respondents and investment pattern in

bank deposits, direct, and portfolio investment schemes. On
the other hand, a significant relationship is also found
between the categor~esof level of education, and occupation
of the respondents and investment pattern in bank deposits,
direct, and portfolio lnvestment schemes.
Further a
signiflcant relatlonship is found between the cateeories of

income level of the respondents and investment pattern in
direct, and portfolio investment schemes.
33.
signiflcant relatlonship is found between
the categories of type and slze of the famlly of the

respondents and investment pattern in bank deposits, direct,
and portfolio investment schemes.
Further a significant
relationship is found between the categories, duration of

stay abroad, and 'reasons for leaving India' and Investment
pattern in bank deposits, direct, and portfolio lnvestment
schemes.
34. rn the light of the analysls it 1s found that
there is an insignificant relationship between the

categories of country of residence, religion, and age group
of the respondents and impact of lncsntives on bank

deposits.
A significant relationship is found between the
categories of lev21 of eduation and impact of incentives on

bank deposits.
35.
It is statistically proved that there is a
significant relationship between the categories of

occupation, level of income, and type of the family of the
respondents, and impact of incentives on bank deposits. An
insignificant relatlonship is found between the categories
of 'size of the family', 'reasons for leaving India', and
'duration of stay abroad' and 'impact of incentives on bank
deposits'.
36.
It is found that a majority of the
respondents prefer to invest in direct, and portfolio

investment schemes, and government securities because
certain investments In specified assets nze exempted from
income tax, wealth tax, and gift tax.
Tax-reduction on
long-term capital gains at a flat rate of 20 per cent, and

earnings on Government bonds, units of UTI, etc., are
exempted from lncom tax.
37. The following null hypotheses were accepted
'There is no relationship between preference of

bank deposits, and corporate securltles and the country of
residence'.
'There is no relationship between preference of
bank deposits, and corporate securities and religion'.
'There is no relatlonship between the availing of
incentives on bank deposit and age'.
'There is no relationship between the availing of

incentives on bank deposits and the country of residence'.
And the following hypothesis is also accepted.
'NRIs prefer direct investment to portfolio
investment irrespective of their country of residence,
occpation, and level of income'.
Ilowever, the following null hypotheses were
statistically found to be invalid.
incentives on bank deposits and education'.

incentives on bank deposits and income'.
Suggestions
The following are the major suggestions prompted
by the above analyses:
1. It is observed that most of the procedures

covering exchange controls and taxation were unnecessarily
complicated and cumbersome leading to long spells of delay.
These problems could be resolved by the policy makers in
consultation with NRI representatives.
2. The policies and procedures have to be

formulated considering all the aspects of the problem.
Some
merchant bankers seem skeptical about geLting large funds

from NRIs for investment in shares of Indian companies,
since the procedure for repatriating the sale proceeds of
such investment is cumbersome at present.
The RBI authorizes repatriation of sale proceeds
on production of a
'no objection' certificate from the
Income Tax Officer of NRI cell.
Por getting such a
certificate, the non-resident investor has to wait till the

assessment of his income for
particular year is finalised.
It would, therefore, he necessary to amend the relevant

section of the ITA for allowing repatriation of such sale
proceeds, after payment of capital gains tax at a specified
rate at source, without the investor having to wait for
completion of his assessment of income in India.
3. Large banks having good overseas business, or
banks which have been getting large remittances from NRIs

can start specialised desks for handling the work of
investments of NRIs.
They could advertise such facilities
through their overseas branches.
It might be useful if
their overseas branches also have specialised desks for

handling investments of NRIs.
Whoever takes such an
initiative and starts offering such services can hope to

reap the benefit.
4. Operating theNRER account is considered as
uneconomical from the point of view of the banks; it is

suggested that there is a need to cut the rate at which
India borrows from NRIs.
This will generally be a bid
higher than the deposit rate abroad, and yet a bid lower
than the rate at which India borrows commercially.
5. By exempting the NRI deposits from the
statutory provisions of CRR and S L R , banks may be allowed to

release cent per cent of the NRI deposits, in order to
enable them to offset the loss expected to be incurred in
the operation of an NRER account. However, this proportion
needs a closer look on larger interests of the national
economy.
6.
It is necessary that banks should be allowed
to have freedom in the matter of fixing, and changing the

interest rates on NRERIFCNR accounts so as not only to
prevent impairing their profitability but also to regulate
the limited quantum of liquidity in the banking system.
7. The GO1 should take serious action in reducing

and monitoring continuously the gap between the rate of
interest on external borrowing directly, and the rates on
NRI deposits to reach optimum level.
8. The RBI should review the FCNR interest rates
"
periodically to ensure that the interest rates offered here
are competitive against the interest rates prevailing

elsewhere; otherwise India may stand to lose in the longrun.
9. NRIs should also be allowed to open various
accounts such as Savings, Current, Recurring, etc., in FCNR

scheme, by which the cost of FCNR funds can be further
reduced, and the investment inflow can also be increased.
10. It is suggested that there should be adequate
protection of NRI funds against foreign currency risks due

to decline in the value of Indian rupee, particularly
against the dollar. Problems relating to the acquisition of
house property by NRIs should also be removed.
11.
It would be of great use if branches of UTI,
like Indian banks abroad, are incorporated outside India to

mobilise individual savings of NRIs for investment in India.
Or the Indian banks abroad should help in the sale/purchase
of units of UTI.
12.
The Indian banks abroad should provide
additional ancillary services to NRIs such as information

about market value of shares, etc.
The procedure regarding
the investment in bank deposits should be simplified.

13.
Improvement of the monitoring and information
system of banks and stock exchanges is urgently called for.

Computerization of their information system seems to be an
essential requirement in this context.
Dissemination and
analysis of data have to be done speedily if the control

function is to be performed effectively by the stock
exchanges and the banking system. Implementation of complex
policies require both an organisational system and a human
capacity of a higher order.
14. The GO1 should make a feasibility study in
places where it desires to establish and develop industries,
especially Agro-based industries, and suggest ways to NRIs
to promote industrial establishment in those places.
15.
Regarding the direct investments, the
cumbersome procedure should be relaxed, and priority should

be given to NRIs for establishing industries in which they
are interested.
16.
More incentives should ; ~ eprovided for
investment in the new issues, of new companies as against

established companies. This will bring more investments in
new companies.
17. The GO1 extends incentives and concessions to
all NRIs who invest their funds in India irrespective of the
fact whether they remit funds with or without repatriation
benefits.
It is suggested that more incentives, exemptions,
reliefs, etc., should be offered to those NRIs who remit

funds without repatriation benefits.
In fact, such NRIs
deserve a preferential
patriotism.
treatment since they evince greater
Furthermore, their remittances do not involve
any drain on foreign exchange reserves in future. This will

remove the present policy and lure more funds from NRIs on
non-repatriation basis.
More incentives should be provided for
1R.
investments coming directly into projects.

more NRI
This will woo
investments in projects.
19. In addition to providing fii.ancia1 incentives
to NRIs, the
GO1
should also provide a prospective NRI
entrepreneur with all infrastructural facilities for setting

up industries.
These could include telephone and telex
facilities, which are vital for any businessmen. This will

improve the image of NRIs in establishing industries in
India.
20. Since the avenues for NRIs for investment are
many, and since they can hope to get larger returns on their
investments abroad, they can be lured to invest in shares of
Indian companies only if they are offered better facilities
and around the same return in the long-run.
Indian
companies and banks could also touch their patriotic sense.
21. The GO1 may formulate schemes wherein only a

portion of the profit or the investment may be allowed to be
repatriated.
22. Regarding the ceiling on portfolio investment,
it is observed that there is no logic in rigidly enforcing

the five per cent limit in the case of all, because
the
present policy allows NRI invest-ment upto 40 per cent, 74

per cent, and upto 100 per cent in a new cnmpany as also in
a fresh issue of an existing company in direct investment
schemes.
So, the ceiling of one per cent and five per cent
need to be relaxed.
23.
In order to further motivate the NRIs to
invest more in India
the Indian companies should provide
adequate time for subscription.
In addition, a Special
Commission can be appointed for providing adequate time for

subscription of capital.
24. In order to interact with prospective

investors abroad and keep them abreast of what is going on
in India and the opportunities awaiting them, it is
necessary to create greater awareness among NRIs about
India's technical capability and potential industrial base.
This could be done through organising seminars,
trade fairs, workshops, etc., and also through pamphlets,
and advertisements in various media in the countries where
the NRIs live. In addition to liberalizing the policies
further,, marketing the existing investment opportunities
among NRIs would probably woo more funds from them.
25. An aggressive marketing effort is called for
to make the NRIs aware of these investment opportunities.

It is therefore, suggested that there is a need for a
concerted and well co-ordinated effort to be initiated by
Indian banks with branches abroad, Government's missions,
and embassies, and the offices of the IIC to bridge the
information gap, which in turn would prompt the NRIs to
avail themselves of the investment opportunities in their
country of origin.
26.
The GO1 promises to honour its debts to
foreign banks and other international financial institutions

such as the World Bank.
At the same time the Government has
steadfastly refused to include its debts to NRIs in its

official figure of external debt.
NRIs have, therefore,
shown a great concern for this indifferent attitude of the

COI.
It is suggested that the GO1 may consider the idea of
including NRI investments also in the official figures of

external debt.
27. In general, the NRI policy should be firm and
clear. Where clarifications are needed, Government response

should be quick.
Speedy decision-making will add to
credibility and to the confidence of NRIs. Undue delays and

needless confusion will defeat the policy itself.
Scope for Further Research
1. The present study is based on both primary as
well as secondary data taking into account the variables

'time', 'exchange rates', 'interest rates' and the personal
variables
such
as
'age',
'education', 'income',
'occupation', 'country of residence', etc. However, studies

may be conducted including variables which can also
influence the inflow of NRI investments such as 'the
industrial and investment policy existing in the country',
'the awareness of the NRI investors about the fiscal laws in
India and the investment opportunities, incentives and
concessions available to them'.
2. No attempt could be made in the present study
in the evaluation of banks in wooing NRI investments.
So,
further research can be done by analysing the Bank-wise,

Region-wise, Sector-wise, and even State-wise progress ofNRI deposits, and account-holders.
Thereby, the performance
of the banks in India in luring NRI funds into bank

accounts can be assessed.
3. Company-wise progress of NRI investments in
equity/preference,
convertible/non-convertible
may be analysed; thereby
debentures
lt can evaluate he performance of
the Indian companies in attracting NRI funds into capital

market. It may also suggest ways and means to improve the
performance of them in luring NRI funds into new fields.
4. A study can also be conducted on the cost of
yield on optimum utilisation of NRI funds.
This will help
the policy-makers to decide whether further incentives

should be given to NRIs.
5. The respondents selected for this study were
from the State of Tamil Nadu and from the Union Territory of
Pondicherry.
The socio-economic and cultural charac-
teristics may differ if such types of people are contacted

elsewhere in India.
6. The study on the attitude of NRIs towards the
investment facilities, incentives, and concessions may be

undertaken elsewhere in India adopting scaling techniques
and perceiving their attitudes. This would help the country
to decide on areas where concentration is needed urgently
and badly.
Agrawal. A.N, Varma. H.0, Gupta. R.C, "India" Economic

Information year book, 198&-89, National Publishers
House, New Delhi.
Agrawal. B.P, Investment Guidelines for Indians Abroad,
(19841, Aruna Publications, New Delhi, P.1.
Badhwar, w-Non-Resident Indians' Com lete Reference
Manual, (1986), Law and Biis-is,
iew ~ e i h i ,
Bird and Oldmnn, gpagings on Taxation innEeyeIgpiig
Countries, The Johus Wopkins Press, Baltimore.
Chacko. 0.1 The Non-Resident Indian's Guide on Taxation and
tn,t;emtsevnl
Law Publishers.
Dharmendra Bhandari, Non-Resident Indians, Incentives for
Setting up an Industry, (Sept.1984), UBS Publishers'
Distributors Ltd, New Delhi.
Non-Resident Indians Taxes and Incentives
1984-85, (Dec.1984), Jaipur ~ r i n t e r s , i ~ ~ '
---
Dhawan. O.P, Non-Resident Indians Investment Facilities, 4th

Ed., (1985), Standard Booksellers, Dariber Kalan, Delhi.
Exchan e Control Failities for investment by NRIs, (1989),
RBI: ~ e m b l i s h e r s~ v t x d . ,Bombay.
Facilities for Investment by Non-Resident Indians, (July
'85), IIC Publications, New Delhi.
Formation e f ~ C o m p a n y in India, (1988), IIC Publication,
New Delhi
Francis Cherunilarn, Business and Government, (1986),

Himalaya Publishing House, omb bay.
Gopalakrishnan. P.9, &Regarding
Non-Residents in India,
(lBBS), S.Chand & Co. Ltd., New Delhi, p.5.
India Investment Guide, (1988), IIC Publications, New Delhi.
Investing in India: A Guide to Entrepreneurs, (1988), IIC
Publications, New Delhi.
Jack Clark Francis, Management of Investments, (1983),

McGra-Hill International Book company, Tokyo, p.564.
Jay Narayan Vyas, =Investment
Polic and Procedures: A
Ready Reckoner, Saket CommunicationY C x r e , Ahmedabad;
p.2.
Kuldeep K. Hajeela, " A Com l k e Guide for Non-Resident
Indians", Jaico P u b l ~ & i n g ~ H o u s ~ , ~ o m b a y - Myths and Realities of Foreign Investment in India, (1988),
IIC Publications, New Delhi.
Nishith. M. Desai, Non-Residents Investments Incentives and
Tax Planning, *-special
reference to tax heavens
(1986). Taxmann Publications (P) Ltd., elh hi-.-Non-Resident Indians/overseas Corporate Bodies Investment in
India, (June, 1986), IIC Publications, New Delhi.
NRI-An Investment Guide (1988), IIC Publications, New Delhi.
NRI Investment in India: Changes since December, 1985,
(1988), IIC Publications, New Delhi
NRIs/OCBs for-investment-in India - Procedures, (June,
1988), IIC Publications, New Delhi.
Pikale.S.V, and Pikale, G.S, Non-Residents - Taxation and
Investment in India, Jaico Book Publishing House,
Bombay.
Preeti Singh, "Investment Management" (Security anal sis and
portfolio management), 1986, Hindustan Publishing iouse,
Ranina.H.P, Corporate Taxation, Orient Law House.
Rao. V.C, A Review of India's Balance of Payments: The
Development Process of the Indian Econom , (198'jS;
Himalaya Publishing House, Bombay, p.p.547-548:
Sukhendra and Gurha, Tax Planning, Modern Law Publication.
Swaminathan. R, FERA on Corporate Sector lincluding Special
Chapter on NE-Resident
Indians), (1987), Bharat Law
House, New Delhi.
Taxes
and Incentives, 1976-77, (A G~iide for
Investors), ITC
Tnx Incentives in India: Questions and Answers, (1988), IIC

Verma.V.P. and Tikku. C.K, Taxation ofNon-Residents,

(1969), Taxmann, Khari Baoli, Delhi.
11 ANNUAL RERXtTS AND BULLETINS
Bulletins of the RBI, Bombay for several years.

Bulletins of the UTI, Bombay for several years.
Exchange Control Manual, (1987), Volume I, RBI, Bombay.
Files and Records of the Indian Overseas Bank, Central
Office, Madras for several years.
Foreign Exchange Reserves, (RBI Bulletin), (June, 1988),
Issued with Supplement, Vol.XLI1, No.6, P.S. 526.
Income Tax Act - as amended upto date
Korharl's Industrial Directory of In31a, (1986), Investmenr
by Non-Residents of Indian Origiq. p~.62-64.
RBI Annual Reports, Bombay for several years
Reports and Records of the Indian Investment Centre for
Several years, New Delhi.
Reports of Currency and Finance, RBI, Bombay for several
years
Reports of the RBI, Exchange control Department, Foreign
Investment Division, Bombay.
a)
Quarterlp
(i) Indian Journal of C o m e r e
(A Quarterly Publication of the Indian
Commerce
Association)
Uurugesan. 8, Investment Incentives and Concessions to NonResident Indians, Vol.XLI1, Part 4, No.d57, OctoberDecember, 1888, pp.33-38.
Maji.M.M, Taxation of Non-Resident Indians, Vol.XLI1,

Conference No.158, March 1989, pp.171-181.
(ii)The Journal of Indian Institute of Bankers
Kalyan Banerji, Indian Banks Overseas An untapped potential,

Diamond Jubilee Special Issue, 1928-1988, Vo1.59, No.1,
January - March 1988, pp.57-62.
(iii) World Economic Outlook
April, 1989, Published by IUF.
b) Monthly
Banking Finance (A Leading Journal of Banking

Finance)
CRR on FCNR and NRER, January, 1989, p.6.

Vo1.2, No.1, 1989, p.6.
(ii) Fortune India '
May, 1987, p.17

Shakun Deshmukh, In the Vonderland of Investments, December,
1988, Vol.VI1, No.4, p.23 & 24.
Krishna Moorthy. R , Investment B Tax Planning for the NRI
( I ) , December, 1988, Vol.VI1, no.4, pp.18-20.
Investment & Tax Planning For the NRI
February, 1989, Vol. 111, No.4, p.24 B 25.
(2),
( i i i ) IIC- Monthly Hews L e t t e r s
For Several Months

(From 1988 June - 1990 June)
( i v ) Indian Banking T a y D Tomorrow
(The Journal of the Indian Banking World)

Banking Chronology, Important Banking, February, 1978, p.37.
May, 1987, p.27 & 28
June, 1987, p.28 & 29
July, 1987, p.39 & 40
NRIs expect too much freedom., September, 1987, p.26, 27 &
33
NRI deposit at dollar 1.5 billion per year, October, 1987,
p.35
Septermber, 1988, p.39 & 40
(v)The Banker (A Monthly Economic and Banking

Journal)
NRIs allowed to invest in mutual funds, February, 1988,

p.7,8 & 45.
March, 1988, p.28
June, 1988, p.10 & 11
July, 1988, Vo1.35, No.5, p.7
March, 1989, p.7.
( v i ) The Yuugement Accountant
February 1987, No.2
State Bank of India Monthly Reviw
(vii)
Darekar. S.R, Investment Opportunities for NRIs, February,

1990, Volume XXIX, No.2, pp.47-64,
(viii)
Chartered Accountant
Gopaldoss. B, Facilities and Incentives for Non-resident

Indians, Vol.XXXVII, No.3, September, 1988.
(ix)
Chartered Secretary
Janardanan. V , Foreign Exchange Regulation Facilities for

NRI Investments, June, 1990, p.45.
c) Fortnightly
Business India (The Magazine of the

Corporate World, Bombay)
January 26
February 8, 1987, p.13
Jerry Rao, Indians Abroad

1988, pp.90 5 91.
Coming of age, 2-15 May,
October 3-16, 1988, p.9

Alpana Killawala, RBI under R.N.Malhotra-Has he made a
difference, October 1-14, 1990, p.63.
Business
World
Business)
Vijayaraghavan.
p.36.
(The Magazine for Indian
The Wrong Signal, 15-28 August,
Augest 29
September 11, 1990, p.20.
Volume 8, Issue 19, p.64.
(iii) India Speaks

Sandesh, NRI Investment in Gujarat, September 18, 1989,
p.18.
July 31, 1989, pp.90-92
(v)
investment
Opportunities
Bill tabled to grant relief., Vol.111, No.14, p.1.

Keltran: NRI tie up for software, Vol.11, No.14, p.2
Sushi1 K.Jain, Investment Opportunities, 1-15 April, 1989,
p.3.
Aruna Gaitonde, Facilities,.., 1-15 June, 1989, Vol.111,
N0.5, p.4
New FCNR ~nterestRates, 1-15 June, 1989, Vol.111, N0.5, p.4
NRI deposits, 1-15 June, 1989, Vol.111, No.5, p.4.
Gulf NRI's resources remain untapped, 16-30 June, 1989,
Vol.111, No.6, p.1
NRI Capital Markets investments, 16-30 June, 1989, Vol.111,
No.6, p.1
(Special Correspondent), Gujarat ..., 16-30 June, 1989,
Vol.111, No.6. p.1 8 6
1-15 July, 1989
FCNR Rates Revised, Vol.111, No.18, 16-31 December, 1989,

P. 1
NRI Invest in hotels made easy, No.111, No.18, 16-31

December, 1989, p.4.
NRI to produce Spectacle lenses in AP, Vol.111, No.20. 16-31
January, 1990, p.1
Sushil. K. Jain, Planning to york Abroad, 16-31 January,
1990, p.4
NRI Venture, February, 1990, p.1
NRI funds, February, 1990, p.6
NRIs and real estate, February, 1990, p.13
NRI Investment in Candouble, Vol.111, No.22, 16-28 February,
1990, p.2
Returing NRIs and Impact of cars, 1-15 March, 1990, p.4
INRIC for change in FCNR schemes, Vol.111, No.24, 16-31
March, 1990, p.7
(Special Correspondent), $ 500 rn NRI funds, 16-31 March,
1990, p.1 & 5
(Special Correspondent), NRI Incentives in budget, March,
1990, p.1
Interest Rates on Non-Resident Deposits, Vol.IV, No.1, 1-15
April, 1990, p.3
Shabbir. M.S., NRI Investment in Industries-11, 1-15 May,
1990, p.7
d) Weeklies
(Special Correspondent), Liberalisation of Investment by

Nan-Resident Indians, May 1, 1982, pp.731-740.
Better Bcope for NRI, July-August, 1982, p.165
Enlarged Scope for NRI, July-August, 1982, p.357
How do we help Indians Oversea, July-August, 1982, p.425
Liberalised Investment Schemes, July-August, 1982, p.11

Non-resident investment in Gujarat, July-August, 1982, p.57
(Commerce Research Bureau),
The Economy, Resource
Utilisation in the Task, February 20-26, 1986, p.16
June 27-July 3, 1987, p.36
Radhesyam Purohit, Investment climate in India is Positive,
July 25-31, 1987, 78th year of Publication, p.30
Upsure in NRIs flow of funds, November 14-20, 1987, p.14.
February 11-20, 1988, p.16 8 35
New Rules on NRI Subscription, February 27-March 4, 1988,
P.2
Rao. S.R.K, Basic Weaknesses of Stock Exchanges, July 9-15,
1988
September 12-18, 1988, p.4
(Commerce Research Bureau), Economy faces major setback,
November 14-20, 1989, p.17
(Special Correspondent), The Economy: Govt. turns to NRIs,
August 6-12, 1990
(ii) Economic L Political leeklr

(A S-ksha
Trust Publication)
NRI Consultancy, January 16, 1988, p.72
Prakash. C. Jain, Towards Class, January 16, 1988, pp.95-97
6 99-102.
Mahesh Srivastava, Market Research, February 27, 1988,
pp.26-M.30
Ramachandran, S, Consumer Behaviour, February 27, 1988,
pp.M.22-M.25.
Verghese. S.K, Developments, April 30, 1988, pp.890-908
FCNR deposits and Exchange Reserves, August 6, 1988, p.1612
6 1613.
Sharma. J.V.M, Investment allowances, October 22, 1988,

pp.2235-2238
(iii)
Investment leek Financial Express
IV WElS PAPERS (Dailies)

a) Pinancial Express
Non-resident Indian Investment: I Analysis of Policy issues,
March 29, 1982.
Non-resident Indian Investment: I1 Need for programatic
approach, March 30, 1982.
Ranina. H.P, Taxation & Financk: Should non-residents invest
in India?, September 3, 1982
Budget and Non-residents, March 7, 1983
Deposits of non-residents: Need for rational interest rates,
April 9, 1983
NRI funds in tie-ups Spurt, April 15, 1983
Call to revamp
NR
Investment, April 25, 1983
NRI Investment boost, April 25, 1983

Non-resident dangers, April 25, 1983
Well run cos. need insulation from take-over bids by NRIs,
April 27, 1983
NRI menace to managements: Fund bodies to go by track
records, May 1, 1983
'NRI Investment sops pragmatic', May 2, 1983
Five per cent limit on NR Investment, May 3, 1983
NR
Investment limit raises new doubts, May 4, 1983
'Non-residents' bid to control cos.: Take-over sans govt.

help impossible: study, May 5, 1983
No steps for misuse of rules by NRIs, May 7, 1083
No change in Policy, NRI investors told, May 8, 1983
Panab rules out lowering
1983
NRI take-over threat
NRI' investment ceiling, May 14,
ICC Stand not clean. May 15, 1983
Centre's NR Investment definition Vague, May 16, 1983

NRI Portfolio investment: RBI working out share deal norms,
May 16, 1983
Checking NR forays, May 20, 1983
Govt. Volte face leads to poor NRI response, May 20, 1983
NR Investors eye sick units, May 24, 1983
Issue 'Special shares' for NRIs, June 8, 1983
NRI shadow over RBI posting, August 11, 1983
NRI funds flow: Need for co. Act changes, August 27, 1983
Venkataraman. P.A, NRI deposits & profitability, October 4,
1983, p.2.
More Sops for NRI suggested, October 8, 1983
NRI can invest in high priority sector: Ficci, January 8,
1984
Voting rights for NRI sought, January 10, 1984
NR Portfolio investment: Indians in UK seek lifting of 5 %
ceiling, February 4, 1984
NRIs in Far East Keen on tie ups, February 13, 1984
NRI-Reservoir of talent, capital, February 16, 1984
NRI Corporation motted, February 28, 1984
TN plans Corporation to tap NRI resources, March 25, 1984

NRI $, P deposits fall, April 30, 1984
'Bald equities may scare away NR investors' May 16, 1984

Drive to attract NRI investment from S.E. Asia, May 23, 1984
Rs.90 Crore NRI project for SEEZ (Santa Cruz Electronics
Export Processing Zone), June 9. 1984
told to be more realistic on NRI Investments, July
1984
Stress on mopping up more NRI funds, July 10, 1984
Wooing NRIs-the new way, July 18, 1984
NRI-Investment Proposals for West Bengal, August 16, 1984
Single point clearance for NRI investments in WB from Sept.
1. 1984, August 16, 1984
NRI Investment Scheme "has not flopped", August 22, 1984
Banks to help TN tap NRI investment, September 21, 1984
To lure NRI Investors - KSIDC to set up offshore investment
co., September 28, 1984
Growing Non-Resident Interest, October 6, 1984
Free point in Andamans to lure NRI Investment? October 13.
1984
Pre-operative expenses: Inward remittance by NRI investors
made easy, October 18, 1984
Govt. Okays proposal from NRIs in Prineeton, December 17,
1984
Panic recall of deposits by NRIs in Gulf, February 15, 1985
Wealth tax waiver for NRI assets, deposits, February
1985
Central Bank drive to step up NRI deposits, March 6, 1985
NRIs on buying Spree, June 29, 1985
NRI stake in India, July 15, 1985
Investing NRIs, July 27, 1985
Rational Share investment norms neursary NRI Deposits, July
27, 1985
NRIs urge easier investment norms, August 6, 1985

Cujarat lures more NRIs, August 13, 1985
NRI Investment
Plea to accept bank guarantee, August 14,
1985
(Commerce Research Bureau), NRI '-Investment more than double

in two years, August 16, 1985, p.3
Interesting NRI, August 27, 1985, p.2
NRI Investors' plea to remove disincentives, September 2,
1985
(Special Correspondent), NRIs told to draft norms for

proposed panel, September 3, 1985, p.4
(Commerce Research Bureau), interest on NRI deposits: Need
for frequent changes, September 10, 1985, p.6.
Muthuraman. P.R, Implications of NRI interst rate cut,
September 14, 1985, p.4
October 6 , 1985, p.3
'Paul defied NRI investment Scheme', November 1, 1985, p.7.
NRIs in Japan offer to invest, November 9, 1985
(Speical Correspondent), Big rise in direct NRI investment
approvals, December 5, 1985, p.4
NRIs to seek removal of procedural hurdles, December
1985
Scrap NRI Investment Scheme: PND Chamber, January 6 , 1986

Monetary restraint in China, February 3 , 1986
(Financial Express Bureau), NRI $,
deposits fall, April 3,
1987, p . 3
(Commerce Research Bureau), Crowing Non-resident interest,

October 10, 1987, p.4
October 15, 1987, p.3
~ctober24, 1987, p.4
Twenty Seven tie-ups with NRIs approved in 1987, March 13,
1988
Ranina. H.P, Investment Opportunities for NRIs-I (Taxation &

Finance), March 18, 1988, p.5
NRI Corporation in Germany offers technology, March
1988, p.3
Ranina. H.P, Investment Opportupities for NRIs-I1 (Taxation
& Finance), March 25, 1988, p'.5
George. C.T, Interest Structure of deposits in banking-I,
March 28, 1988, p.5
Interest Structure of deposits in banking-11,
March 2 b , 1988, p.5
NRIs seek more sops, April 3. 1988
NRIs in US help forge stronger ties, June 29, 1988'
NRI bonds may fetch $ 200 m., August 28, 1988
Canara Banks Plan to run NRI banks abro-d, September 27,
1988
Rao. K.V, Why incentives fail to lure NRIs, January 9, 1989,
P.3
Naresh Monocha, NRI acts as conduit for US co. funds,
January 17, 1989, pp.1 8 4
February 2, 1989, p.4
(Financial ExpPess Bureau). Assocham for changes in direct
tax laws, April 20, 1989, p.6
Swaminathan. S. Anklesaria Aiyar, The two-way NRI debt trap,
May 25, 1989, p.3.
July 16, 1989, p.3
(Own Correspondent), Banks Wooing NRIs with novel ways,
August 17, 1989, p.4.
Bishwajit Bhattacharyya, Direct tax reforms & NRIs,
October 5, 1989, pp.4 & 12
November 13, 1989, p.3
November 17, 1989, p.3
Special Deposit Scheme for Gulf NRIs, September 7, 1990,
Vol.XI, No.103, p.1
September 9 , 1990, p.4
b) Indian ExDreSS
Piparaiya. R.K, Expatriate funds:

February 14, 1983
and reali
_, Expatriate funds: Rhetories and realities - 11,

February 15, 1983
Dangers of non-resident investment-I: Turning black into
white, April 15, 1983
Dangers of NR investment-11: Inviting financial disaster,
April 16, 1983
Dangers of NR investment-111: No
remittances, April 17, 1983
limit to inward
Dangers of NR investment-IV: Top firms face take-over

threat, April 18, 1983
Non-resident Conundrums, May 6, 1983
Non-resident whites can also invest in India, May 25, 1983
Ceiling on NRI holding a 'paper tiger', June 8 , 1983
Non-Policy on Non-rcsidcnt, June 23, 1983
New Investment norms for NRI trusts. May 19, 1984
Centre, States keen on attracting NRI funds, July 19, 1984
Plea for hike in-ceiling on NRI Investment, August 6, 1985
MGR invites NRIs to invest in Tamil Nadu, August 15, 1985
NRI bank in US fares well, August 21, 1985
October 18, 1988, p.13
October 24, 1988, p.5
December 6, 1988, p . 1 4
New Scheme for Mid East NRIs, August 22, 1990, p.12
August 28, 1990, p.13
Tamil Nadu to get natural gas, September 5, 1990, p.4

SBI to issue US dollar NHI bonds, September 15, 1990, p.12
Government to shift focus on NRIs, September 19, 1990, p.4
US NRIs can invest in Indian Stock Markets, October 7, 1990,
P.3
c ) The Economic Times
Concern over tax sops to non-residents, April 27, 1983

Government stand on take-overs by non-residents: clear
picture during budget debate likely, April 27, 1983
Pranab dispels fears of take-over by Non-residents, May 1,
1983
RBI permission needed for excess equity: Five per cent
ceiling on non-resident holdings, May 3, 1983
Non-resident investment: PHDCCI wants Ceiling to be lowered
to two per cent, May 8 , 1983
K0thari.D.C. Policy Vague, May 8 , 1983
Non-resident Window: Keep it wide open, May 9 , 1983
Share buying by non-residents: No cause for concern: Pranab,
May 10, 1983
Non-resident shareholding, FICCI wants ceiling low ered to 2
p.c., May 11, 1983
Non-residents raid fever grips promotors, May 13, 1983
Non-resident shares, May 19, 1983
NRI Portfolio investments: RBI modifications, May 19, 1983
ARI Investment: Covt, bid for amicable Settlement, August 1,
1983
Take-oyer bids by Indian cos.: Rolc of institutional bodies
crucial, August 14, 1983
Non-resident take-overs: The good, the bad and the ugly,
August 15, 1983
Nanda, No NRI Investment in reputed cos.: August 20, 1983

Swraj Paul rules out compromise, August 20, 1983
Patel. I.G, NRI Investment Sops: Treat cos. & persons
separately, ~ugust27, 1983
Press % NRI capital Seminar: Investigative reporting on
corporate sector vital, August 28, 1983
Govt. to end impose on NRI shareholding?, August
3 0 , 1983
IIC for corporation for NRIs, October 4 , 1983

Samuel Paul, NRI Investment: Chaos or Competition, December
13, 1983
NRI Interst in Steel & Electronics, December 15, 1983

NRI Scheme: Review of take-over war, December 20, 1983
Companies must register NRI shares, December 22, 1983
Clearance for six NRI proposals, December 30, 1983
Over Hundred NRIs meet on January 6, 1984, January 5 , 1984
Portfolio Investment: NRI scheme fails to take off, January
9 , 1984
NRI register of exports, January 9 , 1984

NRI Investment: Swraj wants probe, January 12, 1984
NRIs want a new deal, January 16, 1984
NRIs ( 1 2 ) allowed to establish export units, February 9 ,
1984
Sops for NRI: Disappointment at Budget, March 16, 1984

Flood of Investment proposals'from NRIs, March 28, 1984
Project Investment: NRIs favour Maharashtra, April 14, 1984
Borrowing limit for NRIs to be raised, May 31, 1984
Hong Kong's NRIs worried, June 1, 1984
NRIs and Tax Laws: Need for removal of impediments in
investments, June 4, 1984
Non-Resident Funds, June
5,
1984
High overseas interest rates play havoc: NRI investments set

to Shrink, June 8, 1984
Rs.212 crores investment by NRIs, June 14, 1984.
No concert on NRI share transfer: Govt., July 11, 1984
Increase in NRI Proposals, July 16, 1984
Non-Resident External Accounts, August 11, 1984
Investment in WB: NRIs set up two cells in US, August 16,
1984
NRI Investments-KSIDC to set up offshore trust, September
29, 1984
NRI Investments, December 4, 1984
NRI to support TIL management, February 15, 1985
No outflow of funds from NRI's deposit accounts, February
17, 1985
Shortfall put at Rs.150 crores -Non-resldent funds flow
regains momentum, February 24, 1985
Loan deposits more beneficial to NRIs, April 4 , 1985
NRI Investments, June 12, 1985
Viswanathan, T.C., (The Economic Times Research Bureau),
Non-Resident Investment: TV Parts, Video Cassettes
preferred, June 17, 1985, p.7
Favourable climate for NRI investment, June 22, 1985
Companies under threat of NRI take-over, June 30, 1985
NRI cheer over India's economic revival, July 30, 1985
Streamlining of Norms for NRI investment urged, Auguest 8,
1985, p.2
NRI deposits, August 26, 1985, p.2
NRIs Debentures, September 1, 1985
Procedural delays irk Gulf NRIs, September 5 , 1985
NRI lobby under fire, September
5,
1985
NRI has nothing but regrets, September 11, 1985

Scope for NRI Investment, October 28, 1985
NRI Venture in Maharashtra, November 6 , 1985
NRI funds flow may be hit, November 16, 1985
Crisis in shipping industry-Move to tap NRI funds, November
25, 1985
NRIs to bring up investment limit, December 22, 1985
NRI investment, December 28, 1985
NRIs meeting with Minister, December 30, 1985
Securities for loans to NRIs
debentures', December 31, 1985
'Banks not accepting
US NRIs seek tax concessions, Rs.1200 crore can be raised,

December 31, 1985
China: Joint Ventures, January 14, 1986
Bureaucracy unresponsive: NRI, January 27, 1986
Tapping NRI funds, New scheme on cards, January 18, 1988
NRI bonds, Funds flow may increase, March 2, 1988
FCNR deposit rate revised, May 22, 1988
Gulf NRI group to set up units, June 28, 1988
NRI depositors seek restrospective facility, July 29, 1988
NRI investment in industry rises, August 19, 1988
NRI interest rates cut, August 22, 1988
Ruchika, NRI's role in Indian Economy, (World Trade Centre),
November 17, 1988, pp.2 8 3
(PTI Corporate Trends), Non-Resident Indians as creditors,
May.18, 1989, p.6
August 11, 1989, p.3
August 25, 1989, p.3
d) The Hindu
Incentives for non-resident Indians, April 25, 1982

NRI's trade against Companies motivates, says FICCI, August
2, 1982
Fears on investment concessions ror non-resident Indians,
April 18, 1983
Gopalakrishnan. C.V, How genuine the "take-over' fear, April
21, 1983, p.4.
Concessions to non-residents: no basis for fear, April 22,
1983
NRI Investment: Govt. allays fears to take-over bids, April
27, 1983
NRIs prefer investment in new units, January 9 , 1984
Proposals approved for Rs.200 crore NRI Investment, January
11, 1984
NRI projects to fill foreign exchange gap, February 23, 1984
NRI venture in entertainment electronics, January 23, 1985
Sushi1 Kirmur, (iiilf NIlIs rush for home shares, August 26,
1985, p.3
December 8 , 1988, p.23
December 16, 1988, 11.10
Rajendran. S, Taxation of NRIs, April 5, 1990, P.19
Finance and Family, Tax forum, Taxation of NRIs, April 15,
1990, p.19
Fresh incentives to NRIs, June 27, 1990, p.9
'Un-accounted money being re-routed through NRIs', August
27, 1990, p.7
e) The Tiles of India
Non-residents in grab bid, April 14, 1983

A major improvement, May 4, 1983
"Take-over danger persists", May 4, 1983

Steps against take-over bids adequate: J.R.D. Curbs on
voting rights of non-residents urged, May 9 , 1983
RBI modifies non-resident plan, May 15, 1983
Role of institutions in take-over bids, May 23, 1983
Flow of NRI deposits to India continues, July 27, 1984
Lacunae in NRI Scheme, February 25, 1985
Problems galore for NRI investors, February 25, 1985
NRI wants to bring Turbo Computer, July 20, 1985
NRI Investment Package, August 21, 1988.
f ) The Hindustan Times,
June 25, 1990, p.3
IUERVIFlI KXEWLE lU NRI INWSlUB
Country of residence:
(as status of NRI)
Religion:
Present Nationality :
Nationality:
Age :
Sex: M/F (tickd)
Educational
Qualifications: (Tick)
Present
Occupation: (Tick)
(i)
(ii)
(iii)
(iv)
(i) WorkerITechnician
(
Upto Matric.
( )
Degree & FG Degree ( ) (ii) Supervisor/Executive (
(
Diploma/Tech. Degree ( ) (iii) Doctor/Engineer
(
( ) (iv) Business & Others
Others
Marital Status
Number of children:
Type of family
Status of the
Spouse
Parental
Occupation
A~lualIncome :
(approx.value
in rupees)
LIETAILS A83VP STAY AHUMD
1. When did you leave India and.

number of years of outside
stay India so far
Year
Total No.of Years
2. What are the principal

reasons to leave India
please tick ( J)
2.1 for employment

2.2 for business
2.3 for studies
2.4 for vacation
2.5 for service on deputation
2.6 any other reason (specify)
3. Kindly give the details of your visits to India:
The frequency of Duration Furpose
Anwunt
visits and total of each
other than spent on
visits so far
time stay personal
each time
(in Rs.)
(1)
(2)
(3)
(4)
Whether the
expenses are
met by your
employer or
yourself
(5)
4. Do you send any amount f m abroad to India? If so, kindly

provide the purwse
(please tick J )
4.1 for maintaining family in India
4.2 for gifts and donations
4.3 for transfer of legacies
4.4 for repatriations of savings

4.5 for provident fund and retirement
benefits f r m abroad.
4.6 for investment purpses in India
4.7 for any other purpse~Jspecify)
5.
Could you recollect the NRI investment opportunities in

India? Also kindly state the schemes in which you made your
investment.
(please tick J).
ir
1
x
1
Aware Aware
Invested Invested
5.1 Foreign CurPency Non-
Resident Account Scheme

of Bank deposits otherwise known as FCNR Term
deposit.
0
5.2
on-resident
(External)
Rupee Account Scheme of
bank deposits in SB
a/c, RD a/c, FD a/c'and
Current a/c, otherwise
known as NRE Rupee a/c.
5.3 Ordinary Non-resident

a/c of different types,
otherwise known as NRO
a/c.
0 0
5.4 Direct investments

under 40% scheme,
otherwise, production
oriented investments in
. industries/companies
under repatriation
basis.
0
T
I
1
Invested Invested
5.5 Direct
investments
under 74 % scheme,
otherwise, priority
sector oriented investments in industries/
hotels/hospitals/cnmp
anies under repatriati0
on basis.
5.6 Direct investments

under 100% export oriented scheme, otherwise
under cent per cent repatriation basis scheme
5.7 Direct investments in

sick units under no
limit on repatriation
basis.
0 0
5.8 Direct subscription in

any industries under no
limit undcr non-repatriation basis.
0
5.9 Portfolio investments

(in
shares
and
debentures) under repatriation basis.
0
O o
5.10 Portfolio investments

under non-repatriation
basis.
,
5.11 Investments in h p a n y
deposits under repatriation basis.
0 0
5.12 Investments in Osmpany

deposits under nonrepatriation basis.
0 0
5.13 Investments in units of

UTI, NSC, Government
Bonds/ Securities, etc.
6. Do you aware of the following incentives and concenssions
that are being given to NRI investors in India.

(please tick
6.1 Balances on FCNR/NRER

accounts are repatriable.
0 0
J)
6.2 Earnings on FCNR/NRER
accounts are exempted

from Income Tax.
0 0
6.3 Balances in FCNR/NRER
0 0 . 0
0
. from Wealth Tax.
6.4 Gifts from FCWRJNRER

frrm Gift Tax.
0
6.5 Interest rates on M;NR/
NRER accounts
higher.
are
6.6 Loan facilities are

available MI FCNR/NREZ3
accounts term deposits.
6.7 Local payments can be

easily debited to NRER
account.
0 0
5.8
Special series of
cheques are available
in NRER account.
0 0
6.11 Earnings on other

investments, like,
bonds, NSC, units of
UTI, etc., are exempted
from Income-Tax.
0 0
6.12 Tax-reduction on long' term capital gains at a

flat rate of 20%.
(Income from shares,
debentures, deposits
with companies and
Government securities)
6.9 Currency conversion
facility is available
in NREFi account.
,
6.10 Risk of exchange loss
is protected in FCNR
account.
0 0
specified
assets are exempted
0 0
from wealth tax.
6.13 Certain
of certain
specified assets are
exempted from Gift-tax.
6.14 Gifts
Kindly provide the details ofqour present investments in

different schemes
7.
Investments in Bank Account Deposits
FCNR a/c
NRE Rupee a/c (in Rs.)
Rupees
a/c a/c a/c
a/c
(4+5+
6+7)
(1) (5) (6)
(7)
(8)
Deposited
8.
Direct Investments
Non-repatrinblc
Llcpntrinble
Gross
Total
(5+6)
Scheme Limit
74%
100% sick 100% Exp3rt Total No Limit
40%
oriented
(1+2+
Scheme Scheme Units
3+4)
-(1)
(2)
---
(3)
(4)
(5)
(7)
(6)
--
Portfolio Investments
10. Generally you prefer to invest in Bank Account, tick ( J )
your opinion on the benefits expected from your investments.

10. 1 If your investment is in the form
(
10.1.5 Loan facility is available.
10.1.6 Rate of Interest is higher.
of NR(E) Rupee Account Deposit.

10.1.1 Earnings are exempted from
Income Tax.
10.1.2 Balances are repatriable.
10.1.3 Balances are exempted f m
Wealth Tax.
10.1.4 Gifts from the account are
exempted from Gift Tax.
10.1.7 Special type of cheque
facility
10.1.8 l m a l debits can k c
mudc
easily.
10.1.9 Currency conversion faci-
lity is available.
10.2
If your investment is in the form

of FCNFI Account Depasit, tick (J)
your opinion an the benefits expected f m your investments.
10.2.1 Earnings are exempted f m
InTax.
10.2.2 Balances are raatriable.
10.2.3 Balances are exempted from
Wealth Tax.
10.2.4 Gifts from the account are
exempted from Gift Tax.
10.2.5 Loan facility is available
10.2.6 Rate of interest is higher.
10.2.7 Protected from risk of any
loss due to exchange rate
variation.

of direct investments, tick ( J)
your opinion on the benefits
expected from your investments.
10.3.1
Investments in new equity

in the priority sector is
free from Wealth Tax.
10.3.2 Option to pay Inwme-tax at

a flat-rate of 20% on income/lona-term capital
gain$ fr& certain &
fied assets (shares and debentures).
10.3.3 Certain specified assets
are exempted from Wealthtax.
10.3.4 Gifts of certain specified
assets are .exempted from
Gift-tax.
10.3.5 Repatriation facility is
available.

of portfolio investments (in
shares & debentures through stock
exchanges), tick ( / ) your opinion
on the benefits expected from your
investments.
10.4.1 Option to pay kpcome-tax at
a flat rate of 20% income/
long-term capital gains
from, etc., certain gpecifiedassets (shares &
debentures).
10.4.2 Repatriation facility is
available.
10.4.3 Certain specified assets
are exempted from wealthtax.
10.4.4 Gifts of certain specified
assets are exempted from
Gift-tax.
10.4.5 Investment can be made in
joint name with other NRIs.
11. Gut of the available investment schemes, in which scheme you

are interested to invest, and why?
12. Please bring out some of the major problems that are faced
by you in investing in India:
12.1 Problems relating to bank deposits:
12.2 Problems relating to direct investments:

12.3 Problems relating to portfolio investments
(Shares & Debentures)
12.4 Problems relating to investment in units of UTI, W,

Company deposits and other Government Securities:
12.5 General problems relating to overall investments:
13. Kindly bring out your suggestions relating to facilities,

incentives and concessions that are available to NRI in
India.
14. What do you feel about your investments in India?

NRI Investments in India

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NRI Investments in India

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N R I INVESTMENTS I N INDIA :

PR08LEMS AND PERSPECTIVES

T h e w Submitted t o Pondtcherry Un~versltv

Guhde and Supervisor

This is to certify that the thesis, "IRK

Counter Signature by the

R.AZEAGAIAE, Y.Coa.. Y.Phi1..

I hereby state that the thesis for the Degree of

INTRODUCTION AND DESIGN Of THE STUDY

INVESTMENT PATTERN AND IMPACT OF INCENTIVES

This academic pursuit drew inspiration from many

It is my pleasant privilege to place on record my

sincere gratitude to all the persons who inspired and helped

Reader, Department of Comperce, Pondicherry University,

Dr. D. Rajagopalan, Professor and Head, Department of,

I shall be failing in my duty if I do not express

Shri A. Sreedharan, (Exchange Control

Officer), Shri C. Ethirajan (NRI Cell), and Shri Antony John

Department, Reserve Bank of India, Madras for their immense

I also thank Shri K.V.K.

Yurthy, Member of the

Faculty, Reserve Bank Staff College, Madras, who gave

I am highly indebted to Shri

Joint Adviser (NRI), and Shri O.P. Ranga, Section Officer,

Research, Madras, the Indian Investment Centre, and the

I recall with gratitude the kind help extended in

Finally, I express my thanks to Mr.D.G.Rtumlingnm,

Saravanan, RAMTEC, Pondicherry, for

their kind help and co-operation extended to me in the neat

Title of the Table

Outstanding Balances of NRER Account and

Trend of NRI Investment in Bank Deposits

Currency-wise Trend of NRI Investment in

Average Interest Rates on FCNR

Trend of Average Interest Rates on

Co-efficient of Regression for Growth of

Cost of Yield on NRI Deposits in India

Direct Investment by NRIs

Industry-wise Trend of NRI

State-wise Trend of Approved

State-wlse NRI Investment in

State-wise Trend of Approved Projects

Region-wise NRI Investment in Industries

Region-wise Trend of NHI Investment

Portfolio Investment by NRIs (Actual

Trend of NRI Investment in

Capital Issues to NRIs by Indian Joint

Trend and Progress of Capital Issues of

Title of tbe Wle

Scheme-wise NRI Investment in units of

Trend of Scheme-wise NRI Investment

Source-wise NRI Investment in units

Trend of Source-wise NRI Investment

Awareness and Availing of

Awareness and Availing of Facilities

Awareness and Availing of Incentives and

Awareness and Availing of Incentives and

Chi-square Distribution for Awareness

Chi-square distributiol~ for Awareness

Chi-square Distribution for Awareness

Chi-square Distribution for Awareness

Investment Pattern in Direct Investment

Investment pattern in Direct Investment

Chi-square Distribution for Preference