China+1 and India's Consumption Boom: How Money Is Flowing Out of India And Why PA-CB Will Redefine Cross-Border Payments

For two decades, global businesses looked to China as the factory of the world. Today, they're looking at India, not just as a production hub, but as a consumption powerhouse sending billions of dollars abroad every year. As India's private consumption reaches historic highs, the real story isn't just about money coming into India, it's about the unprecedented outward flows reshaping global payments, and how RBI's new Payment Aggregator – Cross Border (PA-CB) framework will determine who wins in this new era.

From "Factory China" to "Consumer India"

The China+1 strategy emerged as multinational corporations sought to reduce single-country dependency on Chinese manufacturing, particularly after COVID-19 disruptions and geopolitical tensions. Companies from Apple to automotive giants embraced a diversification approach, not abandoning China entirely, but building complementary manufacturing bases elsewhere to improve supply chain resilience.

India has positioned itself as a leading China+1 destination, with government initiatives like Make in India, strong engineering talent, and expanding export infrastructure. But here's the lens shift most analysts miss for India, China+1 is not just about factories coming in, it's also about consumption going out.

• India's rising consumption is sending more money out of India every year through travel, imports, education, SaaS subscriptions, and profit repatriation.
• These outward flows now constitute a critical part of the global payments story, representing billions in cross-border transactions.
• RBI's new PA-CB framework, introduced in October 2023, will determine how this money actually moves over the next decade, and which platforms can facilitate these flows compliantly, efficiently, and at scale.

As India becomes both a production base and a consumption giant, understanding the mechanics of outward payments is no longer optional for global businesses, it's foundational.

India's Consumption Engine

Private Final Consumption Expenditure (PFCE)—the total spending by Indian households on goods and services has reached 61.4% of India's GDP in FY25, the second-highest share recorded in the past two decades. This means more than three out of every five rupees of India's economic output is driven by what its citizens are buying, consuming, and experiencing.

PFCE grew by 7.2% in FY25, accelerating from 5.6% in the previous year, largely driven by a rebound in rural consumption and rising urban aspirations. Looking ahead, real PFCE is projected to grow at 7.0% in FY25-26, reflecting sustained momentum in household spending.

Outward Remittances: How Much Money Is Actually Leaving India?

The Reserve Bank of India's Liberalised Remittance Scheme (LRS) is the primary regulatory window through which Indian residents send money abroad for personal purposes. Under LRS, any resident individual can remit up to USD 250,000 per financial year for any permissible current or capital account transaction, or a combination of both.

Where Indians Are Sending Money Under LRS

Travel remains king, accounting for nearly 60% of all LRS outflows and showing resilience even when other categories fluctuate. Education and maintenance flows have softened recently due to stricter visa policies in Canada, US, UK, and Australia, but equity investments and property purchases abroad are growing, reflecting diversification by affluent Indians.

How Indian Consumption Drives Global Revenues

Beyond personal LRS flows, business-to-business and business-to-consumer outward payments from India form another massive layer of cross-border transactions. These flows are critical for global companies earning revenue from India, and they operate under distinct regulatory pathways.

Import & Business Payments

Indian businesses routinely pay abroad for:

• Imported goods: Machinery, raw materials, components, and finished products that Indian manufacturers and traders source globally.
• SaaS and cloud infrastructure: Subscriptions to AWS, Microsoft Azure, Google Cloud, Salesforce, HubSpot, Slack, and hundreds of other enterprise platforms.
• Consulting, marketing, design, and technical services: Payments to foreign agencies, freelancers, and service providers for expertise not available or cost-effective domestically.

These payments are governed by FEMA (Foreign Exchange Management Act) rules, require proper invoicing and documentation, and flow through Authorized Dealer (AD) banks or, increasingly, through PA-CB aggregators for smaller-ticket, recurring transactions.

Travel, Tourism & Education

Every outbound Indian tourist is effectively a "walking FX flow." From booking flights on international carriers to paying for hotels, dining, experiences, and shopping abroad, these transactions convert INR into foreign currency and represent substantial revenue for global hospitality, travel, and retail brands.

Overseas education involves multi-year fee flows to universities, plus living expenses, health insurance, and ancillary service providers (application consultants, visa agencies, accommodation platforms). Though education remittances have declined recently from USD 3.58 billion in FY24 to USD 2.92 billion in FY25, the base remains large, and the long-term trajectory is upward as India's middle class expands.

Big Tech & MNC Flows: Profit Repatriation, Royalties, and IP Fees

For multinational corporations operating in India, repatriating profits, paying royalties, and remitting fees for technical services (FTS) are essential mechanisms to extract value from their Indian operations.

Key mechanisms:

• Dividends: Indian subsidiaries (WOS/JVs) can freely repatriate dividends to foreign parents after paying applicable taxes, with no RBI approval required under the automatic route.
• Royalties & FTS: Payments for brand names, trademarks, patents, software licenses, and technical services are common. These are subject to withholding tax (typically 10–20% under Indian Income Tax Act, often reduced under Double Tax Avoidance Agreements) and must comply with transfer pricing regulations to ensure arm's-length pricing.
• Branch profit repatriation: Foreign companies operating branch offices in India can remit net profits abroad after taxes and RBI approval, with profits taxed at around 40% (base rate plus surcharge and cess).

Why this matters for global companies: India isn't just a large market, it's also a stable, rules-based jurisdiction for sending money out, as long as documentation is strong, taxes are paid, and FEMA compliance is maintained. For MNCs, India offers both revenue growth and repatriation clarity, a combination not always available in emerging markets.

How Outward Payments from India Actually Move Today

Typical Payment Rails

1. Bank SWIFT transfers through Authorized Dealer (AD) banks: The traditional route for large, documented cross-border payments. Banks handle KYC, purpose code tagging, FEMA compliance, and settlement through SWIFT networks.
2. Fintechs, neo-banks, and specialist FX platforms: Many fintechs offer better rates and UX for personal remittances and small business payments, often layering on top of bank or PA-CB rails.
3. Card-based spend: For travel and small online purchases, international credit and debit cards remain popular, though they incur FX mark-ups and are subject to LRS limits and TCS.

Common Friction Points

• Documentation gaps: Missing invoices, unclear supplier agreements, or inconsistent university admission letters can delay or block payments.
• Bank-level compliance scrutiny: AD banks/partners are conservative and often require extensive paperwork, especially for large or unusual transactions.
• FX mark-ups and opaque fees: Traditional banks charge 1.5–3% FX margins, plus hidden charges, making the true cost of remittances unclear to senders.
• Slow settlement and reconciliation: SWIFT transfers can take 2–5 days, and tracking is poor compared to modern digital payment UX.

Payment Aggregator – Cross Border

On October 31, 2023, RBI issued a landmark circular creating a new regulated category: Payment Aggregator – Cross Border (PA-CB). This framework brings all entities facilitating cross-border payment transactions for import and export of goods and services under direct RBI regulation, replacing OPGSP arrangements and setting clear rules for the next generation of cross-border payment intermediaries.

Key Facts About PA-CB:

• Mandatory authorisation: All non-bank entities facilitating cross-border payments must now be authorised as PA-CBs by RBI.
• Net-worth requirement: Minimum net-worth of ₹15 crore at the time of application, rising to ₹25 crore by the end of third financial year.
• Per-transaction cap: PA-CBs can facilitate transactions up to ₹25 lakh for goods and services, a significant jump from earlier small-ticket limits, enabling mid-ticket B2B and B2C flows.
• Three types:
  • PA-CB-I: Import-only (facilitating payments from India to abroad).
  • PA-CB-E: Export-only (facilitating collections from abroad to India).
  • PA-CB-E&I: Both export and import (full cross-border aggregation).

Why PA-CB Can Be Revolutionary Over the Next 5–10 Years

Standardised rules = easier for fintechs to build scalable, compliant products.

With a clear regulatory framework, payment platforms can invest in building robust cross-border products without the risk of ad-hoc rule changes or unclear compliance expectations.

Higher limits + broader permitted transactions = more of India's outward consumption can move via modern aggregators.

The ₹25 lakh per-transaction cap means PA-CBs can now handle not just tiny personal remittances, but also:

• Mid-sized SaaS and cloud infrastructure bills for startups and SMEs.
• Import payments for small and medium importers.
• Educational and medical payments that often exceed older limits.

Better reporting and supervision = lower AML risk, more trust for global counterparties.

RBI's direct oversight of PA-CBs means stronger KYC, anti-money laundering (AML) controls, and transaction monitoring, which increases trust among foreign banks and payment networks.

For platforms like EximPe:

The PA-CB framework makes it easier to plug into regulated rails and offer cross-border flows as part of a single stack—combining invoices, trade documentation, FX conversion, and compliant payments in one place. Businesses no longer need to juggle between banks, forwarders, and brokers, they can manage end-to-end flows digitally with EximPe.

What This Means If You're a Global Company Getting Paid from India

If your customer is in India, whether a consumer buying your SaaS subscription or a business importing your products, your revenue flow is gated by:

• LRS / FEMA rules on the sender side: The Indian payer must have limits, documentation, and purpose codes in order.
• Banks or PA-CBs that actually move the money: The intermediary's efficiency, FX rates, and compliance quality directly impact your revenue recognition and customer experience.

What EximPe - RBI Licensed PA-CB Platform Does

• Abstracts away FEMA/RBI complexity: Instead of the Indian sender navigating purpose codes, TCS calculations, and documentation requirements manually, the platform guides them step-by-step or automates it entirely.
• Offers better FX, tracking, and documentation: Specialist platforms aggregate liquidity, negotiate better FX rates than retail banks, and provide real-time tracking with invoice reconciliation.
• Integrates with PA-CB and bank rails underneath: Depending on transaction size and type, the platform intelligently routes via PA-CB (for mid-ticket) or bank SWIFT (for large payments), giving users the best of both worlds.

Comparison: Bank SWIFT vs PA-CB