India’s forex spending saw a notable dip in October 2024, dropping by 14% to $2.4 billion compared to $2.8 billion in September. This marks the lowest overseas expenditure since June 2024, as per data released by the Reserve Bank of India (RBI). The decline in international spending comes against the backdrop of record-breaking domestic expenditure via digital payment channels during the festive month.
Key Highlights from October Forex Spending Trends
- Decline in Overseas Spending:
Indians spent $2.4 billion overseas in October, significantly lower than the $3.9 billion peak recorded in June 2023, just before the revised tax-collection-at-source (TCS) norms were implemented. - Breakdown of Forex Usage:
- Travel: $1.5 billion (largest share)
- Maintaining Close Relatives: $284 million
- Fees for Education and Other Purposes: $221 million
- Domestic Spending Surge:
While international spending waned, domestic digital payments hit new highs, reflecting increased consumer activity during the festive season. Credit card transactions, UPI payments, and debit card usage reached unprecedented levels.
Festive Spending Fuels Domestic Digital Transactions
October 2024 proved to be a bustling month for domestic expenditure, with spending through credit cards and UPI platforms achieving record figures.
- Credit Card Transactions: Domestic spending crossed ₹2 lakh crore in October, driven by online and offline purchases during the festive period.
- UPI Transactions: UPI payments reached a total value of ₹23.4 lakh crore, marking the highest monthly transaction value in 2024.
Sharp Decline in November Spending Across Channels
November 2024 saw a significant cooling-off in spending across all payment channels, following the October peak.
- Credit Card Transactions:
- At Shops: Volume declined by 7%, while the value dropped by 14% to ₹68,233 crore.
- Online Transactions: Experienced an 11% fall in volume and a 17% drop in value to ₹1,01,061 crore.
- Debit Card Transactions:
The overall value of debit card spending also witnessed a decline, reflecting the post-festive adjustment in consumer behavior. - UPI Transactions:
- Volume: Fell by 6.6% to 1,548 crore transactions in November, down from 1,658 crore in October.
- Value: Declined by 8.3% to ₹21.55 lakh crore, compared to ₹23.50 lakh crore in the previous month.
Impact of Tax Norms on Forex Spending
The implementation of revised TCS norms in June 2023 continues to influence Indians’ foreign exchange spending behavior. The June 2023 peak of $3.9 billion in overseas expenditure highlighted preemptive spending ahead of the rule change. Since then, monthly forex spending has moderated, with October’s figure of $2.4 billion reflecting a more restrained approach.
Outlook for Domestic and International Spending
As the festive buzz faded, November 2024 saw a natural slowdown in consumer activity. Analysts expect domestic digital payments to stabilize in the coming months, while international spending may remain subdued due to regulatory factors and evolving travel patterns.
The contrasting trends between robust domestic spending in October and the decline in international expenditures highlight the shifting dynamics of consumer preferences and the growing reliance on digital payment platforms within India.
As the digital economy grows, shifts in spending patterns will likely continue. Policymakers and businesses must analyze these trends to adapt strategies and support economic growth in a rapidly evolving landscape.