How COVID is hastening the exodus of India’s gilded class

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In July 2020, Henley & Partners, a London-based agency that helps to relocate high net worth individuals — people with a net worth of at least $1 million — opened an office in Mumbai, India.

Coming as it did in the midst of the COVID pandemic, when the Indian economy was in deep crisis due to the virus and the harsh lockdown that followed, Henley’s decision was in response to a surge in interest from Indian HNWIs looking to leave the country. Indeed, between 2019 and 2020, Henley saw a growth of 61% in clients from India expressing interest in their services.

The pandemic accentuated a preexisting trend of rich people from emerging economies looking for the security and freedom of travel that comes with residence or citizenship in an advanced economy.

Popular destinations for Indian HNWIs include the U.S., Canada, Australia and Switzerland among major countries, as well as smaller European tax havens such as Cyprus and Malta that have launched golden visa programs. The appeal of advanced Western countries, unlike that of small tax havens, is not necessarily lower tax rates, but may involve being close to families, access to high-quality education for children, and visa-free travel.

There is an obvious push factor for HNWIs from emerging economies looking to relocate to a safe haven in the advanced world. But there is an increasing pull factor at work as well, which is the raft of countries launching golden visa programs.

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A superyacht owned by an Indian businessman stands in The Grand Harbor in Vittoriosa, Malta in March 2017: the country is one of popular destinations for Indian HNWIs. © Getty Images
The United Arab Emirates traditionally made it notoriously difficult for foreigners to gain citizenship. That changed earlier this month, with the UAE now allowing select groups of investors and professional migrants to be eligible for citizenship. Local officials nominate individual candidates, with cabinet making the final call. This extends the UAE’s earlier golden visa program — which offered a pathway to residency — to one that now offers the chance for citizenship to a lucky few. The UAE is shrewdly positioning itself as a favored destination for Indian HNWIs, which is a short flight away and has for years been a playground for wealthy Indians.

The push and pull factors in tandem are driving many Indian HNWIs to greener pastures. According to Cap Gemini’s World Wealth Report 2020, India added approximately 7,000 new HNWIs between 2019 and 2020. However, according to AfrAsia Bank’s Global Wealth Migration Review 2020, 7,000 HNWIs left Indian shores. In other words, as many rich people left India as were created last year.

The out-migration of HNWIs from emerging economies is somewhat reminiscent of the brain drain, the out-migration of skilled workers. India for example lost many skilled professionals in medicine, science and information technology starting as early as the 1960s to countries including the U.K., U.S. and Canada.

More recently, migration scholars have coined the term brain circulation to refer to the back and forth movement of skilled people in a globalized world. India saw the reverse migration of skilled IT and other professionals during the economic boom of the late 2000s. Anecdotal evidence suggests that these reversed flows have tapered off as the engines of economic growth have cooled in recent years.

Much as the brain drain turned into brain circulation, there is a similar pattern of major advanced countries being both recipients and senders of HNWIs. Again according to Henley, the pandemic has seen a spike in queries for relocation from advanced countries, in particular Canada, the U.K. and the U.S.

By late 2020, as compared to the start of the pandemic, there was a 235% jump in inquires from Americans, an 74% increase from Canadians and a jump of 38% from U.K. citizens. But were such individuals to migrate, they would not be relocating to large emerging economies such as India, but more likely to tax havens in the Caribbean and elsewhere.

There is a curious dissonance in large emerging countries with large gaps in income and wealth such as India, China or Russia. The billionaire class, with entrenched connections at the highest level of politics, benefits from its proximity to power and has neither the desire nor the need to leave. They live in enclaves with the first-world infrastructure that shields them from the world outside.

Outside the billionaire class, however, most folks, including many HNWIs, have to contend with the poor quality of life, including mediocre infrastructure, health and education, political instability, and often a rule of law that is substandard. For such people, exit to advanced Western countries remains an attractive option, one that they are increasingly exercising.

The pandemic has created a once-in-a-generation opportunity for forward-looking countries to attract skilled and wealthy migrants from abroad. Countries such as the UAE have begun to do so.

Meanwhile, advanced Western countries are always going to remain attractive for developing country HNWIs. The challenge is for large emerging countries such as India to not only attract foreign investment, but to hang on to their skilled and wealthy, who will be integral to future growth and development prospects. Unlike the brain drain from countries such as India, the wealth drain is unlikely to circulate back.

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