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Foreign investors prefer to invest in India via Singapore

08 June, 2016

Foreign investors channelled a higher share of their investments into India through Singapore compared with Mauritius in the financial year ended March 31, 2016, for the second time in the last three years. While the momentum was captured previously, latest official statistics show this continued well into the end of the year.

This is partly due to the big quantum of international investors’ money flowing into Indian e-commerce and internet sector at large.

Indeed, the holding firm of India’s top e-commerce firm Flipkart is based in Singapore. So Flipkart, which raised a phenomenal $1.91 billion in 2014 calendar year, would have routed a big chunk of that money in tranches into its Indian operations in 2015.

Several other champions of the Indian digital economy have their holding firms based in Singapore.

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Singapore enjoys a double taxation avoidance agreement (DTAA) like Mauritius. Mauritius has for long been the favourite route for investments in India for foreign portfolio investors, but had been facing flak from Indian taxmen over the loose ends in the treaty that led to leakage in tax due in India. Last month, India and Mauritius agreed to amend the three-decade old treaty in a bid to plug some of the loopholes.

Since the Singapore DTAA is also pegged to Mauritius treaty, foreign investors who are routing their investments in India through the Lion City would also see some of the benefits vanish eventually.

But Singapore shone bright in the year gone by with the total money channelled through the island nation more than doubling to $13.69 billion. The money routed through Singapore was more than what came through Mauritius and the US put together last year.

In another notable trend, US pipped Netherlands—another tax haven—and Japan as the third-biggest source of FDI into the country. To be sure, US investors are the single-biggest driver of FDI in India, but they channel a lot of money through other tax friendly countries.

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Foreign investors prefer to invest in India via Singapore

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