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India records increasing foreign direct investment from tax havens

by April 22, 2017 General

KOCHI:India is at an inflection point of foreign investment, it seems. The FDI inflows into the country have been increasing over the past few years. Interesting, FDI from countries which were known tax havens increased during April-

December 2016-17, government data shows.
Tax havens are countries that have low or near-zero tax rates, especially for some kinds of transactions. Switzerland, Singapore, Hong Kong and Mauritius are the popular ones. But, the list includes others such as Luxembourg, British Virgin Islands, Cayman Islands, the Netherlands and Bermuda, too.
The data assumes significance as the period also includes post-demonetisation era (after November 8, 2016).

“Since 1990, foreign investment into the country has been through tax heavens. Countries such as Mauritius and Switzerland top the list of countries which pump money into India. In the recent past, the Narendra Modi government has taken steps to ease FDI inflows. This has also resulted in increased FDI into India. Recent restrictions on foreign portfolio investment, which came into effect from April 1, 2017, may also force foreign investors to eye the FDI route,” said V K Vijayakumar, chief investment strategist, Geojit Financial Services.

“It is easy to make out that foreign investors still prefer the tax heavens route to avoid tax. In a way, it decreases the intensity of the country’s war against black money. However, the positive trend is that India receives increased FDI inflow,” said Akshay Agarwal, managing director, Acumen Capital Market India.