Four islands comprise 54 per cent of FDI inflows into India in two decades: Data

NEW DELHI: Some 54 per cent of the cumulative FDI inflows from the turn of the century till Septemberend 2020 has been from just four tax shelters — Mauritius, Singapore, Cayman Island and Cyprus, with Mauritius and Singapore accounting for the lion’s share of the money flowing into India.

Foreign Direct Investment (FDI) statistics accessed from the Ministry of Commerce and Industry shows that in the first half of this financial year, too, a little over 41 per cent of the FDI equity flows were from these four tax shelters.

The curious phenomenon of India’s FDI receipts coming from these four island nations has led to suspicion of round tripping by large Indian corporates through these tax shelters which also afford significant secrecy for the ultimate beneficiary of the funds being transferred.

“We are keeping an eye on investment flows and are in touch with both the department of corporate affairs as well as the finance ministry on the issue,” said top officials. Some 29 per cent of all FDI which came in between April 2000 and September 2020 came from Mauritius and another 21 per cent from Singapore. About two per cent each came from Cyprus and Cayman Islands.

In contrast, India’s large trade and investment partners – USA, Japan and Netherlands accounted for sevem per cent FDI inflow during the two decades and Britain for 6 per cent.

“Earlier Mauritius was the main source of FDI for India, but Singapore has now become the preferred jurisdiction for routing FDI,” said officials.

Between April and September this year, some $8.3 billion came in as FDI equity infusion from Singapore, compared to $2 billion from Mauritius and another $2.1 billion from Cayman Islands.

“The tragedy is that much of the FDI coming in through tax havens are mere equity infusions and do not come with any of the benefits which normally accompany FDI – technological upgradation, improvement in competitiveness etc.,” said Prof Biswajit Dhar of JNU and a Member of the board of trade.

“China too leveraged FDI to support its industrialization. But they managed to attract investment from highly industrialised countries and benefited by absorbing new technologies.”

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