Know why NRIs must invest in India for better returns

It’s an exciting time for the Indian economy. Freshly breaking free from the shackles of the pandemic, the markets can once again be seen performing quite well.

The recent Covid-induced market volatility has visibly reduced now. With the government-led effort to enhance foreign direct investment, the Indian market is becoming much more conducive for investment - not just for Indians, but also for the NRIs.

Over the last two decades, tremendous industrial and economic development has brought about a paradigm shift in the country’s fiscal landscape. The stats vouch for this fact. The latest World Economic Outlook report by the International Monetary Fund (IMF) projects a 9.5 per cent growth for the Indian economy in 2021. Also, it witnessed a record 20.1 per cent growth in its GDP in Q1 of FY22.

Not just this, comparing with other major global players puts this into perspective. The forecast for the US economy, for instance, is down to 6 per cent as opposed to the 7 per cent projection in July, and it could further go down as per the report.

India has outperformed the markets of other developed countries like China and Japan as well. These numbers are a welcome change for Indians around the world who have been looking to invest in India’s growth story.

The earlier you invest, the better

There have been projections that India is poised to grow into a $5 trillion economy by 2024-25. It's a hard fact that investments reap better returns over a longer period of time.

Even the interest rates are higher here as compared to countries like the US, Japan, Saudi Arabia and Australia. Especially considering the past year, India has surpassed many developed economies in terms of return rates. From September 2020 to September 2021, Indian markets have delivered up to an impressive 53 per cent return compared to 25-30 per cent in other countries.

Also, if you want ripe returns for a one-time event like the child’s education or marriage or your own retirement, starting early is the key. Your financial planning can only provide robust future protection if you work backwards. Suppose you invest Rs10,000 for a period of 20 years at the rate of 12 per cent returns, you will have Rs1 crore as the maturity amount.

Keeping in mind the inflation, the education or the medical expenses will go considerably up by then. If you delay investing today, you will either have to make up for it by investing a higher amount every month or by losing out on returns. So, if you are wondering what’s the right time to invest in India, the answer is now!

Diversifying your investment portfolio

One of the greatest advantages of investing in India is the range of options available for investing your money. There are goal-based saving plans (for growth, legacy planning or retirement), capital guarantee solutions, guaranteed return plans and annuity plans among others.

One of the best available options is capital guarantee plans. These plans are a mix of unit-linked investment plans (ULIP) and guaranteed return plans. The 50-60 per cent part of these plans goes into a guaranteed return plan and the rest goes into ULIP. While your premium paid remains 100 per cent secure due to the guaranteed return element, you also get to enjoy the returns of the market upside due to the ULIP component. The return rates run as high as 12-15 per cent in the long run under this plan.

However, if you don’t want the market volatility to impact your money at all, you could opt for guaranteed return plans that come with zero risk. You also get a higher rate of interest than FD, which is also tax-free. While FD stands at an average 5 per cent interest rate, these plans could get you up to a 6-6.5 per cent rate. So, if you invest for say, 10 years, you could choose your return as fixed monthly income or a lump sum amount.

If you are looking to invest for your children, there are plans to secure your child’s future even if you are not around. In case the policyholder passes away, the life cover paid to the family takes care of the immediate expenses. You don’t even have to worry about the future premiums, as they are paid by the insurer. The child even gets a regular income on a monthly basis and receives the fund value on maturity.

In case you are someone who’s close to retirement age, you should be looking at investing your corpus into annuity plans as this will ensure a fixed monthly income lifelong. You could also opt for a joint annuity which will ensure financial security for the spouse in case of the policyholder’s death. Annuity plans offer a fixed rate of return between 5.5-6.5 per cent.

Depending on your needs, you can choose one of these plans or you could have a branched out portfolio with your money invested in more than plan.

Vivek Jain is the head of investments at PolicyBazaar.com.

• India