Four reasons NRIs in UAE should invest in India

High interest rates and buoyant equity markets can help you build a nest egg faster, and also allow you to live a financially independent life in your sunset years

India has historically been one of the biggest recipients of remittances in the world. Last year it topped the chart with $69 billion pouring into the country from non-resident Indians (NRIs) and overseas citizens of India. This amount is significant and accounts for four per cent of the country's GDP.
What's really interesting in these numbers is the contribution of NRIs based in the UAE. As per the number crunching by the World Bank, the UAE is the biggest source of remittances to India, accounting for 38.7 per cent share. It is followed by Saudi Arabia with 28.2 per cent share. Most of the UAE-based NRIs remit money for maintenance of family expenses. However, there are many reasons why you should be choosing to remit more and invest in the country, especially if you are an Indian.
The first and foremost reason is retirement. The UAE pastures are better suited for people who work and earn a living. Twilight years, on the other hand, remind many of us of our first home - India. If you are thinking and planning to spend your sunset years there, stashing away some cash every month is always a good decision. The earlier you start, the better it is.

NUMBERS SAY IT ALL
Savings account: Banks in the UAE normally pay an annual interest (or profit) rate of up to 2 per cent on a savings account. In comparison, a savings bank account in India earns an interest rate of at least 4 per cent. Some banks even pay as high as 6 to 7 per cent interest for simply parking money in a savings account.
To put things in perspective, if you start saving $2,500 monthly using a normal savings account that pays 2 per cent interest per annum, you will take 25.58 years to amass $1 million of savings. Comparatively, an account paying an interest of 6 per cent annually will save seven years and allow you to build a savings kitty of $1 million in just 18.33 years.
Fixed and recurring deposits: NRE fixed and recurring deposits are even more lucrative, earning an annual interest rate of 7 per cent and above (compounded quarterly for most) for an investment period of 1 year and 15 days and above. Moreover, the power of compounding helps in growing money faster.
In comparison, term deposit and recurring deposit accounts with banks here earn less interest - running in the range of 1.25 per cent to 2.5 per cent in most cases. There are a handful of banks in the UAE that offer returns in the range of 6 to 8 per cent per annum on a term deposit of about five years on deposits of Dh20,000 and above.

Vibrant equity market: India has vibrant and buoyant stock exchanges that have been generating wealth for institutional and domestic investors for years. More than 5,500 companies are listed on the Bombay Stock Exchange, which is the oldest bourse in Asia.  It has a market capitalization of over $1.7 trillion, and is considered 11^th largest stock exchange globally.
In terms of returns, the 30-share bellwether index, Sensex, has generated over 10.5 per cent returns for investors in the last five years. Its younger cousin, the 50-share Nifty index of the National Stock Exchange  jumped 11.8 per cent in the same time period. Individual sectors such as auto, pharma, and others have gained more than 20 per cent in the same time frame. Investing in asset classes such as these can make you richer and financially comfortable faster than plain vanilla products.

Mutual Funds: If you are too intimidated by crests and troughs of the markets, you can rely on the expertise of the professionals managing retail money in the dynamic mutual funds industry. Fiercely monitored, the Indian mutual fund industry offers a plethora of funds to invest in at extremely low charges. There are more than 40 mutual fund companies in India, offering hundreds of schemes.

Banks and exchange houses in the UAE offer convenient and hassle-free ways of remitting money to India. Making your money work as hard as you do by generating wealth through interests, profit shares, and appreciation in value of the underlying assets, you can have a financial cushion to fall back on. Identify products and asset classes that suit your savings patterns and risk-taking abilities and align your financial goals with it.

Happy investing!
-suneeti@khaleejtimes.com