Mauritius slips to 2nd place on fund flows into Indian markets

US accounted for largest chunk of 'assets under custody' of foreign institutional investors investing in Indian equity and debt markets at end of 2013

Once known as the biggest gateway for flow of funds into India, Mauritius has slipped to the second place after the US in terms of quantum of money being brought in by overseas investors into Indian markets.

According to the latest data available with the capital markets regulator Sebi, the US accounted for the largest chunk of 'assets under custody' of foreign institutional investors investing in the Indian equity and debt markets at the end of 2013 with over Rs 4.37 lakh crore worth funds.

The US was followed by Mauritius with over Rs 3.31 lakh crore worth 'assets under custody (AUC)' of FIIs and their sub-accounts as on December 31, 2013.

Mauritius was on the top with AUC of over Rs 3.51 lakh crore at the end of 2012, while the US came second with Rs 3.42 lakh crore.

During 2013, the assets brought in by the FIIs into the Indian markets from the US increased significantly, while the fund-flow from Mauritius declined amid concerns about suspected money-laundering though the Indian Ocean island nation, which has been consistently denying these allegations.

Among the top-ten countries in terms of AUC of FIIs and their sub-accounts registered in India, the US and Mauritius are now followed by Singapore, Luxembourg, the UK, the UAE, Norway, Netherlands, Canada and Australia.

Among these, Singapore, Luxembourg, the UK and the UAE retained their respective places during 2013, while Norway moved up to the seventh place and Cananda slipped to ninth spot.

The total AUC managed by all foreign investors for the Indian markets stood at close to Rs 14.65 lakh crore at the end of 2013, up from about Rs 13.35 lakh crore a year ago.

Out of this, equity markets account for Rs 5.13 lakh crore investments by FIIs and Rs 8.25 lakh crore by their sub accounts. In the debt markets, the FIIs have poured in assets worth Rs 78,000 crore and sub-accounts have close to Rs 48,000 crore as on December 31, 2013.

According to the government data, the Foreign Direct Investment inflows from Mauritius have also fallen sharply on fears of possible re-negotiation of the tax avoidance treaty between the two countries.

The FDI from Mauritius almost halved during April-January period of last fiscal, 2013-14, to close to $4 billion, from over $8 billion in the same period of 2012-13.

Foreign investors are also said to be apprehensive that a re-negotiated DTAA would eliminate the tax advantage which the Mauritius investors enjoy, while there are also fears that they may lose tax benefit after introduction of GAAR (General Anti Avoidance Rules) provisions, which seek to check tax avoidance by investors routing their funds through tax havens, will come into effect from April 1, 2016 in India.

Mauritius has been one of the biggest sources of FDI into India, which attracted inflows of $77.77 billion FDI from that country between April 2000 and January 2014.