Mauritius top destination for Indian investments

Mauritius has emerged as favourite destination for overseas investment by Indian corporates, replacing Singapore, accounting for $2.27 billion outward FDI during April-February, 2012.

The island nation is also the major source of FDI inflows into India, accounting for about 40% of total flows.

During 2008-09 and 2009-10, Singapore attracted the highest FDI from India, but in the following two years Mauritius become the top destination for such outflows from the country.

In 2010-11, Indian FDI into Mauritius stood at $5.08 billion as against $3.99 billion to Singapore.

In 2008-09 and 2009-10, Indian FDI outflows to Singapore totalled $4.06 billion and $4.20 billion, respectively, while it was $2.08 billion and $2.15 billion in Mauritius, respectively.

As per an RBI data, Indian investments in Mauritius has totalled $11.57 billion since 2008-09.

In the current fiscal (till February) after Mauritius, Singapore ($1.86 billion) attracted maximum Indian FDI followed by the US ($0.87 billion).

Total outward investments by Indian corporates during April-February 2012 stood at $8.86 billion as against $16.84 billion for the whole of 2010-11 financial year.

"...Integration of the Indian economy with the rest of the world is evident not only in terms of higher level of FDI inflows but also in terms of increasing level of FDI outflows," RBI Deputy Governor HR Khan said recently at the Bombay Chamber of Commerce & Industry in Mumbai.

He said outward FDI from India has mainly been by way of equities and loans.

As per UNCTAD's World Investment Report 2011, based on the total FDI outflows, India was placed 21st in the world.

While overseas investments in developed economies is going mainly through mergers and acquisitions (M&As), Khan said the mode of entry into developing economies is observed to be mainly through green-field investments.

"One of the reasons for Indian companies to adopt M&As route for foreign investment in developed countries is that markets in these economies tend to be mature and saturated and, therefore, companies prefer to gain market share through acquisitions rather than green-field investments," he said.

 However, Khan said that India being a current account deficit (CAD) economy, there is a need to closely monitor the capital flows going from the country.

"...Unlimited capital outflows for outward FDI could have significant implications for sustainability of India’s CAD and external debt profile," Khan added.