Singapore remains biggest FDI source for India for 7th straight year
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For the past seven years, Singapore has maintained its status as the biggest source of foreign direct investment FDI ) in India, with an impressive inflow of nearly $15 billion recorded for the fiscal year 2024-25, numbers released on June 1 showed.In the previous fiscal year, the overall foreign investment saw a notable increase of 13 per cent, reaching $50 billion. The total FDI -- which encompasses equity inflows, reinvested earnings, and other forms of capital -- rose by 14 per cent to stand at $81.04 billion during the last financial year, marking the highest figure in three years.Foreign investments are critical for India to enhance its infrastructure, including ports, airports, and highways, to stimulate economic growth. Additionally, FDI plays a vital role in improving the nation's balance of payments and bolstering the value of the rupee against other global currencies, particularly the US dollar.In the fiscal year 2024-25, FDI originating from Singapore surged to $14.94 billion, up from $11.77 billion in 2023-24, according to the most recent data released by the government. Singapore contributed to around 19 per cent of the total FDI inflows for the fiscal year 2024-25. Since the fiscal year 2018-19, Singapore has consistently been the leading contributor of foreign investments in India. In contrast, in 2017-18, Mauritius was the top source of FDI for India, with the country attracting $8.34 billion in foreign inflows from there during the last fiscal year.Following Mauritius, the United States contributed $5.45 billion in FDI, while the Netherlands provided $4.62 billion. The UAE, Japan, Cyprus, the UK, Germany, and the Cayman Islands made additional contributions of $3.12 billion, $2.47 billion, $1.2 billion, $795 million, $469 million, and $371 million, respectively, during the same period. Experts attribute Singapore's prominence as a global financial center, its strong bilateral relations with India, and its role as a conduit for global private equity and venture capital as key factors driving these investments.Rumki Majumdar, an economist at Deloitte India, told news agency PTI that despite the fluctuations in capital markets and trade uncertainties, India has successfully attracted substantial investments that are both stable and long-term."Given that Asia is the second-largest region to attract foreign capital inflows, a significant portion of these funds originate from Singapore. The reasons are manifold. Firstly, as a low-tax jurisdiction with a robust legal system, Singapore serves as a strategic financial gateway to Asia," Majumdar explained.The economist further pointed out that the Double Tax Avoidance Agreement between India and Singapore enables Singapore-based firms to invest in India while minimizing their overall tax liability on income generated in India.Lokesh Shah, a partner at IndusLaw, emphasized that the tax treaty between India and Singapore is a crucial factor propelling FDI. "The ongoing prominence of Singapore in India's FDI landscape now hinges more on genuine business advantages and regulatory benefits, along with Singapore's sophisticated financial markets, its position as a regional hub, and its political and economic stability," Shah said.Rudra Kumar Pandey, a partner at Shardul Amarchand Mangaldas & Co, highlighted that while Singapore will continue to play a significant role as an investor in India, the investment landscape is gradually changing."Singapore's increasing FDI into India is rooted in its function as a global financial hub, which hosts a myriad of international private equity and venture capital funds," Pandey told the news agency. These investors view India as a promising growth market, especially in sectors such as financial services, banking, insurance, business process outsourcing, logistics, computer software and hardware, trading, telecommunications, and pharmaceuticals, and use Singapore as a central base to manage and deploy capital throughout Asia.
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