PM Modi in Singapore: How the island nation became India’s top FDI source
PM Modi in Singapore: How the island nation became India’s top FDI source
Prime Minister Narendra Modi met his Singapore counterpart Lawrence Wong – who had invited the Indian prime minister to make the trip – and received a warm welcome from members of the Indian community. Singapore has consistently been India’s top source of Foreign Direct Investment (FDI) since 2018. Its cumulative inflow into India, which stands at $159.94 billion since April 2000, accounts for 24 per cent of India’s total FDI inflow
 "PM Modi in Singapore: How the island nation became India’s top FDI source")
That accounts for 24 per cent of India’s total FDI inflow.
Economic Times quoted data from the Department for Promotion of Industry and Internal Trade (DPIIT) as showing that FDI in India grew 47.8 per cent year on year to $16.17 billion in April-June this fiscal.
Singapore led the way this quarter with $3.9 billion in FDI – followed by Mauritius at $3.2 billion.
India received to $11.77 billion of FDI from Singapore in the previous financial year – the most from any country.
Singapore has consistently been the largest source of FDI for India since 2018.
In 2017, India attracted the maximum FDI from Mauritius.
Over 440 companies from Singapore are registered in India including the Development Bank of Singapore and United Overseas Bank).
The Enterprise Singapore (ES), Economic Development Board (EDB) and Singapore Tourism Board all have offices in India.
Hindustan Times reported that Singapore’s CapitaLand Investment has vowed to double its funds under management in India by 2028.
The fund currently has $5.66 billion invested in India as of June 30.
“The country is attracting demand from global corporations and institutional investors for quality real assets,” group CEO Lee Chee Koon was quoted as saying by the newspaper.
Koon said CapitaLand would look at the renewable energy and real estate private credit space.
The announcement came hours before Modi’s trip.
It also came a month after CapitaLand launched a fund for business park development in India – which will add million to its funds under management.
Secretary (East), Ministry of External Affairs, Jaideep Mazumdar, ahead of Modi’s trip, predicted big things for the relationship.
“We also expect the visit (to Singapore) to give thrust to the cooperation in the field of semiconductor,” the top official of the MEA said.
“India-Singapore relations are poised for an even bigger take off, than what it has been in the last 10-15 years or so. That is because, we have gone to the next level of identifying areas of bilateral cooperation whether it be in food security, renewables, green hydrogen, semi-conductors. These are areas where we have great complementarities,” said Mazumdar.
He said that he could see the relationship between the two sides taking off to the next stage.
For Singapore, India presets tremendous opportunities and for India, Singapore presents with many options, whether it is value chain, digital technology and semiconductors, he added.
What do experts say?
They say Singapore has emerged as the preferred jurisdiction for investment in India after the India-Mauritius tax treaty amendment.
Rumki Majumdar, Economist, Deloitte India, said that as one of the world’s prominent financial hubs, Singapore attracts global investors who want to invest in Asia.
“Recently, India’s initiatives such as amendments by the SEBI to the REIT Regulations 2014 have created new opportunities for Singapore-based investors, which is why India is likely seeing high FDI from Singapore,” Ms. Majumdar said.
She also hoped that FDI into India would pick up in the latter half of 2024-25.
Sanjiv Malhotra, Senior Advisor, Shardul Amarchand Mangaldas & Co, said that Singapore and Mauritius are jurisdictions used by global investors to route their money into developing economies such as India.
“While there are many geo-economic and political factors why Singapore has gained more prominence in the recent past, the primary reason for it topping the FDI charts for India is tax,” Mr. Malhotra said, adding Singapore has a very competitive domestic tax regime and efficient regulatory set-up.
Historically, the double tax avoidance agreement between India and Singapore provided for many beneficial provisions including capital gains exemption in India for investments made from Singapore and even though this provision has been amended, Singapore still is a credible place to create operations with substance to invest further in South-East Asia (including India), he added.
Malhotra added that in 2023-24, India witnessed a drop in FDI primarily due to the global uncertainty on account of the disturbances in the Middle-East and Europe.
“Hopefully FDI inflows to India may improve in 2024-25 (from 2023-24) but they may still remain below 2022-23 levels. A stable government post elections surely will help the cause of more FDI into India but I see the global headwinds to be too strong as of now,” he said.
Anindya Ghosh, Partner, INDUSLAW, too said that prior to 2016, Mauritius was a preferred jurisdiction for foreign investment in India due to the significant tax advantage it offered as a low-tax jurisdiction for routing investments.
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