India-bound foreign direct investment (FDI) equity inflows routed through Mauritius from April 2013 to January 2014 were a mere USD 4,113 million compared to the corresponding period a year ago (April 2012 to January 2013) when they totaled USD 8,175 million.

According to data released by the Indian Department of Industrial Policy and Promotion (DIPP), a major decline was registered in Mauritius-routed FDI to India till date in the current financial year.

For the 10 months from April 2013 to January 2014, only USD 4,113 million was channeled into the country through Mauritius.

And, with only 2 months to go to the close of the current financial year, it is difficult to imagine the FDI for 2013-14 even closely approaching that for the April 2012 to March 2013 period, when a healthy USD 9,497 million was registered as FDI equity inflows from the island economy.

The reason behind this drastic decline is that investors are increasingly using Singapore as a channel to route funds into India in stark preference to Mauritius.

Spurred on by uncertainty in the Double Tax Avoidance Agreement (DTAA) between India and Mauritius, more and more investors are taking recourse to the Singapore route.

Accordingly, FDI equity inflows of USD 3,678 million were registered from Singapore for the 10 months ended January 2014, already outstripping the full year’s inflow from April 2012 to March 2013, which stood at USD 2,308 million.

However, Mauritius continued to be the main source country for FDI into India, with a share of 21% of the total FDI equity inflows, which still represents a steep drop compared to 42% share last year.

Meanwhile, Singapore is fast catching up. Its share in India FDI equity inflows was 10.3% for the 12 month period from April 2012 to March 2013, but has soared to 19.6% since for the 10 months ended January 2014.

The tax treaty uncertainty with Mauritius has not left India unscathed either. FDI inflows into the country during the April 2013 to January 2014 period declined by 2% to USD 18.74 billion compared to USD 19.10 billion during the same period a year ago, as investors shied away due to lack of clarity over the India-Mauritius DTAA.

Image (Reuters): to January 2014, only USD 4,113 million was channeled into the country through Mauritius, compared to USD 8,175 million in the corresponding year-ago period.

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