Singapore has overtaken Mauritius to become the second-largest source of foreign portfolio investment (FPI) inflows into India, a report by Economic Times stated quoting the latest data from depositories.
As on October 31, Singapore-based offshore funds held ₹4.89 lakh crore worth of securities in India compared to ₹4.69 lakh crore for Mauritius-based funds, it informed.
The largest source of FPI inflows is the United States of America, holding ₹20.1 lakh crore worth of securities as of October 1, added ET.
Back in 2016, India reviewed its tax agreements with both Mauritius and Singapore. During that time, Mauritius-based FPIs held ₹4.3 lakh crore worth assets, which was nearly double that of Singapore's ₹2.4 lakh crore, it pointed out.
Since then, Singapore has been gaining an advantage over its peers. As per the report, this process accelerated post-2021 when Singapore proposed the variable capital company (VCC) scheme for the fund management industry.
Under the VCC scheme, companies have been permitted to freely redeem shares and pay dividends using their assets, which is not the case for regular funds. Also, VCCs aren't required to disclose any data to the public. The scheme also introduced an easier regime for funds willing to redomicile themselves in Singapore, informed the report.
Singapore is especially a dominant player in debt funds. The island nation accounts for nearly one-third of total debt inflows into India with Singapore-based FPIs owning ₹1.1 lakh crore worth of debt papers in India - which is double to that of Mauritius, noted ET.
Market participants told ET that the rise of Singapore has come at the cost of Mauritius, which has been losing sheen as an investment destination in the last few years. In 2020, Mauritius was placed under the grey list of the Financial Action Task Force (FATF) - a major red flag for international companies, it added.