Foreign Exchange, FDI & External Debt (Part – II)

As per the question period, Mauritius was the correct answer. But in recent years, India received largest inflow of foreign capital in equity investment from Singapore. Top 5 investing countries' FDI equity inflows in India in 2023-24 are as follows: 1. Singapore (US $ 11,774 million), 2. Mauritius (US $7,970 million), 3. USA (US $ 4,998 million), 4. Nether- lands (US $4,924 million), 5. Japan (US $ 3,177 million). In 2022-23, Top 5 investing countries in descending order in terms of FDI equity inflows in India were: Singapore > Mauritius > USA > UAE > Netherlands.

However, in terms of cumulative FDI equity inflows from April, 2000 to March, 2024, share of top 5 investing countries in terms of FDI equity inflows in India are as follows (In descending order):

Mauritius (25.31%), Singapore (23.56%), USA (9.60%), Netherlands (7.17%) and Japan (6.17%).

As per the question period, Mauritius was the correct answer. But in recent years, India received largest inflow of foreign capital in equity investment from Singapore. Top 5 investing countries' FDI equity inflows in India in 2023-24 are as follows: 1. Singapore (US $ 11,774 million), 2. Mauritius (US $7,970 million), 3. USA (US $ 4,998 million), 4. Nether- lands (US $4,924 million), 5. Japan (US $ 3,177 million). In 2022-23, Top 5 investing countries in descending order in terms of FDI equity inflows in India were: Singapore > Mauritius > USA > UAE > Netherlands.

However, in terms of cumulative FDI equity inflows from April, 2000 to March, 2024, share of top 5 investing countries in terms of FDI equity inflows in India are as follows (In descending order):

Mauritius (25.31%), Singapore (23.56%), USA (9.60%), Netherlands (7.17%) and Japan (6.17%).

USA and Japan were the top countries to bring FDI in India during the year 1991 to 1995. For the latest position,

As per the question period, Mauritius was the correct answer. But in recent years, India received largest inflow of foreign capital in equity investment from Singapore. Top 5 investing countries' FDI equity inflows in India in 2023-24 are as follows: 1. Singapore (US $ 11,774 million), 2. Mauritius (US $7,970 million), 3. USA (US $ 4,998 million), 4. Nether- lands (US $4,924 million), 5. Japan (US $ 3,177 million). In 2022-23, Top 5 investing countries in descending order in terms of FDI equity inflows in India were: Singapore > Mauritius > USA > UAE > Netherlands.

However, in terms of cumulative FDI equity inflows from April, 2000 to March, 2024, share of top 5 investing countries in terms of FDI equity inflows in India are as follows (In descending order):

Mauritius (25.31%), Singapore (23.56%), USA (9.60%), Netherlands (7.17%) and Japan (6.17%).

In terms of the share in FDI equity inflows in India during 2016-17, top 3 countries were in following order: Mauritius > Singapore > Japan.

As per the latest data, descending order of top investing countries' FDI equity inflows (in 2023-24) is: Singapore > Mauritius > USA > Netherlands > Japan.

Double taxation avoidance agreement (DTAA) was the main reason for large amount of FDI in India from Mauritius. Due to that, many overseas investors invest their capital first in Mauritius and not directly invest in India. In Mauritius they pay very less tax than in India. So it brings tax benefits to them. DTAA provided preferable tax benefits to investment made from Mauritius, and that was the major reason for the re-routing of investments. In 2016, the Indian government amended its tax treaty with Mauritius. After this amendment, the preferential tax benefits were removed partially starting in the fiscal year 2017-18 and removed completely starting fiscal year 2019-20.

The question asked for the 'trend' of Foreign Direct Investment (FDI) in India according to the Economic Survey 2022-23. Page 271 (para 9.16) of Economic Survey 2022-23 says that "Notwithstanding an overall drop in FDI in the first half of FY23 (2022-23), inflows have stayed above the pre-pandemic levels.....". Here the trend is 'falling' though it is still above the pre-pandemic levels. Hence, statements 1,2 and 3 are incorrect and only statement 4 correctly describes the trend of FDI in India. Thus, option (d) is the correct answer. B.P.S.C. has also given the same answer in its final answer key.

In 2010, USA enacted a law known as 'Foreign Account Tax Compliance Act' (FATCA) with the objective of tackling tax evasion through obtaining information in respect of offshore financial accounts maintained by USA residents and citizens. Since domestic laws of sovereign countries (including India) may not permit sharing of client confidential information by financial institutions directly with USA, USA has entered into Inter-Governmental Agreement (IGA) with various countries. The IGA on FATCA between India and USA was signed on 9 July, 2015 and operationalized from 30 September, 2015. Under the IGA, USA will also provide substantial information about Indians having financial assets in USA.

As per the Govt. of India's FDI policy during 2001-02, the foreign firm would have to disinvest 26 percent equity in tea sector in favour of an Indian partner within 5 years. Hence Statement (1) is incorrect. Considering the sensitivity of print media, the Govt. of India has decided that not more than 26 percent foreign capital can be invested in print media. Apart from this, a condition was also laid in the policy that the ownership of the single largest Indian shareholder should be more than 26 percent. Hence, option (b) is the correct answer.

In calendar year 2005, invested capital in Indian companies by foreign institutional investors (FIls) was US $ 10.7 bn. (Rs. 4781 crore).

As per data of NSDL, Foreign Portfolio Investment (FPI) net details (in recent calendar years and financial years) are as follows:

As per FDI Statisties of Department for Promotion of Indus. try and Internal Trade (DPIIT), investments by FII's Foreign Institutional Investors Fund (net) in recent years are as follows:

In January, 2003 Foreign Investment Promotion Board (FIPB) of India was transferred to Department of Economic Affairs, Ministry of Finance by the order of the President. FIPB was abolished in 2017. Subsequent to abolition of the FIPB, the work of granting government approval for foreign investment under the extant FDI Policy and FEMA Regulations, has been entrusted to the concerned Administrative Ministries/Departments.