| Consider the following statements about FDI India. |
| 1. Mauritius has a share of about 29% in total FDI inflows in India. |
| 2. There are reports of treaty shopping by corporates of other countries |
| 3. There are also reports of round tripping through Mauritius. Which of the statements is/are correct? |
A) Only 1 and 2
B) Only 2 and 3
C) Only 1 and 3
D) All 1, 2, and 3
Correct Answer: D
Solution :
[d] Mauritius has regained the position as top source of foreign direct investment (FDI) into India by pushing Singapore to the second slot in 2014-15. Mauritius accounted for about 29 per cent of the country's total FDI inflows last fiscal. In 2013-14, Singapore had replaced Mauritius as the top source of FDI into India. India attracted USD 9.03 billion in FDI from Mauritius in 2014-15, whereas it was USD 6.74 billion from Singapore, according to the data Department of Industrial Policy and Promotion (DIPP). "Treaty shopping" generally refers to a situation where a person, who is resident in one country (say the "home" country) and who earns income or capital gains from another country (say the "source" country), is able to benefit from a tax treaty between the source country and yet another country (say the "third" country). This situation often arises where a person is resident in the home country but the home country does not have a tax treaty with the source country. Round tripping involves getting the money out of one country, say India, sending it to a place like Mauritius and then, dressed up to look like foreign capital, sending it back home to earn tax-favoured profits. The problem for the home country is that native profits escape taxation this way. And instead of foreign capital flowing into the country, local capital just gets a free ride.
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