Singapore became the top source of foreign direct investment (FDI) into India. Singapore replaced Mauritius to become the number one source of FDI. This was revealed by the FDI data for March 2014 of the Department of Industrial Policy and Promotion (DIPP) under the Union Ministry of Commerce Industry and Textiles.
As per the data, India attracted 5.98 billion US dollar FDI from Singapore in 2013-14 while Mauritius invested only 4.85 billion US dollar in India in 2013-14. The total FDI flows from Singapore accounted for about 25 per cent of FDI inflows in 2013-14.
Overall FDI into India grew by 8 percent year-on-year to 24.3 billion US dollar in 2013-14. India needs about 1 trillion US dollar foreign investment by March 2017 to overhaul infrastructure such as ports, airports and highways and boost growth.
Why Singapore became the largest source of FDI into India?
The execution of Double Taxation Avoidance Agreement (DTAA) with Singapore with Limit-of-Benefit (LoB) clause has provided the comfort to foreign investors due to which the FDI inflows increased.
On the other hand, FDI inflows from Mauritius have started drying up on fears of the impact of General Anti Avoidance Rules (GAAR) and possible re-negotiation of the tax avoidance treaty.
The India-Mauritius DTAA is being revised amid concerns that Mauritius is being used for round-tripping of funds into India even though that country has always maintained that there have been no concrete evidence of any such misuse.
Top ten countries investing in India
3. United Kingdom
What is GAAR?
GAAR stands for General Anti Avoidance Rules. The controversial GAAR will come into effect from April 2016 in India. GAAR seeks to check tax avoidance by investors routing their funds through tax havens.
The GAAR provision will apply to entities availing tax benefit of at least 3 crore. It will apply to Foreign Institutional Investors that have claimed benefits under any DTAA.
When: 25 May 2014