Saturday, May 5, 2012

Mauritius leads FDI inflows into India

                                                    Data source: Ministry of Commerce and Industry
                                                                                      *April 2000 to February 2012

Ratings agency Standard and Poor's (S&P) has recently cut India's outlook to negative from stable and issued a threat of potential downgrade, citing high fiscal deficit. As a result, Indian government is facing tremendous pressure to reduce its fiscal deficit. In order to increase revenues for the government, India is planning to review the double-taxation avoidance agreement (DTAA) with Mauritius. The reason behind the review is to prevent misuse of the treaty and track illicit money allegedly stashed in the African island nation. The country was losing more than USD $600 m every year in revenue because of the tax treaty, besides incurring the risk of militant groups using it to route money into India. This announcement had sent a panic wave in the Indian stock markets. It must be noted that Mauritius has the biggest share (39%) of foreign direct investment (FDI) inflows in India.

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