FDI from Cayman Islands to India jumps three-fold to US$ 3.7 billion in 2019-20
- IBEF
- June 10, 2020
According to the Department for Promotion of Industry and Internal Trade (DPIIT), Cayman Islands has emerged as the fifth largest investor in India, with foreign direct investment (FDI) from the nation increasing over three-fold to US$ 3.7 billion in 2019-20.
In 2018-19, India had received FDI worth US$ one billion and in 2017-18, US$ 1.23 billion from Cayman Islands, which is UK Overseas Territory.
FDI from Cyprus also increased by about three-times to US$ 879 million in 2019-20 from US$ 296 million in 2018-19. The DPIIT data showed that it was US$ 417 million in 2017-18.
According to the experts, Cayman Islands has become one of the most preferred jurisdictions for moving investments due to the absence of direct taxes costs. This is one of most substantial reasons why developed economies like UK, France, and Germany are now falling behind.
"In fact, three times year-on-year leap in FDI inflows from Cayman Islands must be viewed as an indicator of how this small offshore tax haven has emerged as a favourite intermediate investment holding jurisdiction by investors across the world rather than India gaining higher popularity as an Investment destination," Mr Nischal Arora, Partner- Regulatory, Nangia & Co LLP said.
"Additionally, investments from tax havens do carry a comparatively higher perceived risk of laundered money, round tripping issues etc, again, which is bound to make the regulators wary of this new trend...In light of (certain) gaps in ascertaining complete beneficiary details, one may expect the government to come out with measures relating to carrying out additional scrutiny or monitoring of investments from such tax neutral jurisdictions," Mr Arora added.
Additionally, high FDI inflow from Cyprus is possibly due to the jurisdiction emerging as the lowest tax rate country in Europe. Singapore is the top investor in India in the last financial year. It was followed by Mauritius, Netherlands, and the US. FDI in India increased by 13 per cent to US$ 50 billion in 2019-20.
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.
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