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AfricaMoney | August 19, 2017

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Mauritius in top 5 for investments of Indian firms; but island invests less in India

Mauritius in top 5 for investments of Indian firms; but island invests less in India

Data from FSC Mauritius shows that India`s share in investments made by global companies through Mauritius has slipped under 10%, even as Mauritius ranks among top 5 nations for investments of Indian firms over the last three years (Image: Air Mauritius)

Mauritius, along with the British Virgin Islands (BVI), Mozambique, Netherlands and Singapore, formed part of the top five nations for investments by Indian firms over the last three years.

In these five countries, the overseas direct investment (ODI) by Indian domestic companies stood at USD 9.6 billion (around Rs 296.64 billion) in 2013-14.

Earlier, in 2012-13, it was at USD 5.03 billion (around Rs 155.43 billion) and USD 6.77 billion (around Rs 209.19 billion) in 2011-12.

These companies mainly invested in sectors such as agriculture and mining, manufacturing and financial services.

“The decisions regarding ODI are taken as part of corporate strategy, keeping in view the applicable policy framework of the originating and destination countries,” Minister of State for Finance Nirmala Sitharaman said in a written reply to the Indian Parliament.

Foreign investments are two way flows, which in general promote economic growth and have positive impact on the economics concerned.

However, the Reserve Bank of India (RBI) reviews the ODI policy regime keeping in view the Balance of Payments (BoP) position, she added.

Indian companies in the manufacturing and infrastructure sectors were allowed by RBI to benefit of external commercial borrowings (ECBs) or repayment of rupee loans availed of from domestic banking system or for fresh rupee capital expenditure under the approval route.

It may be noted that the approval route refers to a process where permission to raise a loan must be applied for to the RBI on a case-by-case basis, depending on the particular project sought to be financed and the industry it hails from.

However, Sitharaman concluded that it had been decided that the repayment of rupee loans availed of from domestic banking system through ECBs extended by overseas branches or subsidiaries of Indian banks themselves would not be permitted.

On the other hand, data from the Financial Services Commission (FSC) of Mauritius shows that India`s share in investments made by global companies through Mauritius has slipped under 10%.

And, this dip in investments to India has happened at the expense of other global investments in Africa, Europe, Americas and some Asian countries having gone up.

Thus, even as Africa accounted for over 54% of the total investment made through Mauritius during 2013, India`s share fell to 9.28%.

In addition, in 2010, India`s share was as high as 32.27%, before declining to 23.25% in 2011 and further to nearly 15% in 2012.

In comparison, Africa`s share has consistently risen from 30% in 2011, to over 40% in 2011 and about 51% in 2012.

The reasons behind this change in focus can be explained by the uncertainties over the India-Mauritius tax treaty and the island nation`s new African strategy, which has spurred increased focus on the continent.

In fact, Clairette Ah-Hen, Financial Services Commission (FSC) Chief Executive Officer, noted late last year that some new investors are not exploring investment opportunities offered by Mauritius as a gateway to India due to tax pact-related concerns.

Although this significant shift in investment stares both countries in the face, Mauritius still maintains its position that Indian remains an important partner, which is why the island nation has decided to provide automatic exchange of tax related information with India.

In May 2014, Mauritian Prime Minister Navin Ramgoolam entered into an agreement with India to provide greater information exchange on tax-related matters, while adding that Mauritius would not allow anybody to abuse or misuse its jurisdiction for any illicit activities.

Source: Press Trust of India

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