Mauritius back in the lead; routes USD 2.28 billion in FDI to India till May
Mauritius remains the largest investor in India with investments of USD 2.28 billion, far exceeding those of Singapore which invested USD 982 million (Image: Emirates)
After a weak year in 2013-14 when Mauritius lost its place as top-ranked FDI investor into India to the Asia-Pacific economy of Singapore, the East African economy has stepped up to a good start in financial year 2014-15.
Last financial year, Mauritius routed around USD 4.86 billion to India, outstripped by Singapore which directed as much as USD 5.89 billion to the Asian emerging economy from April 2013 to March 2014.
However, the island nation has maintained its position this financial year as lead investor into India with investments of approximately USD 2.28 billion across April and May, when India received total foreign direct investment of USD 5.31 billion.
Across April and May, India attracted around USD 1.71 billion and USD 3.60 billion worth of FDI respectively showing a massive upswing in May FDI, according to data released by the Indian Department of Industrial Policy and Promotion (DIPP).
Also, it may be noted that foreign direct investment (FDI) directed to India has grown at twice the rate in May 2014 compared to the month of May 2013. In the corresponding period last year, India had only received FDI of USD 1.63 billion while this year investments have increased to USD 3.60 billion.
Mauritius remains the largest investor in India with investments of USD 2.28 billion, far exceeding those of Singapore which invested USD 982 million, followed by Great Britain with investments of USD 345 million, Japan at USD 319 million and the United States with a lower investment of merely USD 154 million in India.
In the first two months of financial year 2014-15, many sectors in India have benefited from significant investment resulting in FDI growth of 34%, or USD 5.30 billion, against USD 3.95 million in the two corresponding months of last year.
The sector that attracted the most investment is telecommunications at USD 1.51 billion. It was followed by the pharmaceutical industry at USD 680 million, while the construction sector attracted USD 221 million.
Finally, for the five months of calendar year 2014 till May, India attracted investments of USD 13.05 billion compared to USD 9.43 billion in the Jan-May 2013 period.
Meanwhile, coming to Outward Direct Investments (ODI) from India, a report indicates that Indian companies investing overseas have been mostly turning to select countries such as Mauritius, Singapore, British Virgin Islands and the Netherlands.
The report by Indian financial services major Exim Bank however notes that while these jurisdictions provide significant tax benefits, they lack any noteworthy domestic market, thus implying that they in no way warrant the significant streams of investments being directed to them.
Titled ‘Outward Direct Investment from India: Trends, Objectives & Policy Perspectives’, the report went on to comment the ultimate destination of investments is not captured in the data of the Indian central bank, since investments are likely rerouted from these low-tax jurisdictions to other investment destinations.
Hence, the surface data may not accurately reflect the extent of the linkages between India and the rest of the world in terms of actual outward investments.
The research report noted that ODI has been playing an increasingly important role in enhancing the global competitiveness of Indian firms by providing access to strategic assets, technology, skills, natural resources and market.
The report also indicated that overseas assets such as intangibles like brands and goodwill could be as critical to helping Indian firms command a greater share in the world market, as the physical export of goods and services.
Finally, the report stated that India’s outward overseas direct investments (ODI) have undergone considerable change not only in terms of magnitude but also in terms of geographical spread and sectoral composition.
This could have considerable implications for low-cost jurisdictions like Mauritius and Singapore, which appear to be gaining significant traction with Indian investors.