US outstrips Mauritius as route for foreign institutional inflows to India
The US accounted for the largest chunk of ‘assets under custody (AUC)’ of FIIs investing in the Indian equity and debt markets with around INR 45.9 trillion (MUR 22.96 trillion) worth of funds, for the 12 months till December 2013. (Image: Fund Web)
The United States is currently the most popular route for money being brought in by foreign institutional investors (FIIs) into India, while Mauritius has slipped to second place.
With continuing uncertainty over the tax treaty with India, Mauritius is no longer the preferred route for investments into the Asian emerging economy and has been knocked down to second place by the US.
Data from Indian capital market regulator Securities and Exchange Board of India (SEBI) for 12 months till December 2013 shows that the US accounted for the largest chunk of ‘assets under custody (AUC)’ of FIIs investing in the Indian equity and debt markets with around INR 45.9 trillion (MUR 22.96 trillion) worth of funds.
Mauritius followed the US with over INR 38.1 trillion (MUR 19.03 trillion) worth of AUCs of FIIs and their sub-accounts for the 12 months ended December 31, 2013.
Overall, the total assets under custody (AUC) managed by all foreign investors for the Indian markets stood at close to INR 327 trillion (MUR 163.53 trillion).
Among the top-ten countries in terms of AUC of FIIs and their sub-accounts registered in India, the US and Mauritius are followed by Singapore, Luxembourg, the UK, the UAE, Norway, Netherlands, Canada and Australia.
Showcasing the importance of India in the FII domain, since FIIs first opened in 1992, India has seen $167 invested in its equities market and $30 billion in its debt markets. Thus, total FIIs into the country till date are expected to reach $200 billion shortly, certainly in 2014 or even in the next two months.
Meanwhile, a net total of $10 billion has flowed into India already in 2014, according to the latest data available from the Securities and Exchange Board of India (SEBI). The Indian capital markets regulator also said that half of the $10 billion already invested in India this year has come from FIIs into the Indian equity markets, while the other half has gone into the country’s debt markets.
According to the Press Trust of India, the FII inflow into the country has increased because foreign investors are looking at India’s likely government change as a sign of new times.
Investors are expecting that India will have a more stable government, after the dust settles on the ongoing election, which should make economic growth even more robust.
In such an environment, for Mauritius to be denied its hitherto premier position as a route of investments into India is a big blow indeed for the island economy, which is fast yielding rank to United States, with Singapore following not far behind.
The continuing uncertainty over the Double Tax Avoidance Treaty is likely to drag on as the Indian government suspects the island nation is being used for tax evasion by individuals and corporations alike.