SSC Economics Sample Paper NCERT Sample Paper-3

  • question_answer
    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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