India broke its two-year streak of rising in FDI rankings by slipping from the 8th to 11th position in the AT Kearney FDI Confidence Index. According to the report, demonetisation and the introduction of GST has fundamentally impacted the scenario of FDI in India by deterring investors in the short-term. In the first two years of the NDA government, schemes such as Make in India and Digital India pumped in a large amount of cash into the manufacturing and service sectors of the country. But investors are now wary because of the downturn of the Indian economy, changes in American and the tectonic changes in financial markets due to Brexit.
Out of a list of around 40 countries that have investments in India, two of the major countries with a sizeable share in the total annual FDI is United States of America and Singapore. Based on the data provided by the Department of Industrial Policy and Promotion, Government of India, as of March 2018, the graph below shows the amounts of FDI received (in US dollars) from the two countries and compares it against the total FDI received in the last 3 fiscal years.
Singapore ranks 2nd on the list of countries with FDI in India. In 2017, India signed a new tax treaty with Singapore, which prevents double taxation and also gives a host of benefits to entities with commercial operations in India. These same benefits have been applied to Mauritius and hence, Singapore might be a tax haven like Mauritius.
The treaty has also helped Indian entrepreneurs make Singapore a testing ground for Information Technology, social media and gaming applications. They are using Singapore as a testing site because the people of the city state are more tech savvy.
Additionally, Indian entrepreneurs are able to find funding for their brand new ideas far more easily from venture capitalists or even the government in Singapore, than in India. For example, Flipkart is an Indian company but it is registered in Singapore.
The United States of America ranks 7th on the countries with FDI in India. The United States has primarily been interested in the service sector. The erstwhile Obama administration oversaw a 500% increase in FDI from USA in 2015 and 2016. But the story has changed quite a lot now. The Trump administration’s tax reforms prioritise investments in the domestic country and the rising interest rates in the US means that capital is not as easily available now as it is used to be.
Efforts are underway to change that scenario. The Indian Consul General in Chicago, Neeta Bhushan, recently tried to woo investors from the American Midwest by citing opportunities in Punjab, Madhya Pradesh, Andhra Pradesh and Telangana.
In conclusion, notwithstanding the declining FDI growth, Singapore still remains one of the best countries with bilateral tax treaties that ease the complexity of setting up and doing businesses. Singapore’s unique position of being a global trade hub offers other exclusive perks of having low import duties, which make it a top attraction for commerce and finance in general. The story of FDI from the USA however is one of uncertainty. Improving bilateral trade relations and boosting its FDI is dependant not only on dealing with domestic issues but also requires diplomacy to put India on the map for the seemingly coveted foreign dollars.
source https://www.indiaoutbound.org/exploring-us-and-singapores-fdi-in-india/
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