FDI In India: Facts, Figures And Frauds

Foreign Direct Investment (FDI) is a major source of economic development in India. Foreign companies make a beeline to invest in India to benefit from the ease in doing business, friendly environment, lower wages, huge market and so on. FDI keeps increasing year-on-year generating jobs and shows confidence in the India growth story.

The above is the official version, mouthed by Government in each forum and amplified by the media. It will be supported by some headline numbers here and there as evidence. The markets would cheer, there will be self-patting all around and the general public will engage in chest-thumping.

After all, the increase in FDI is a sure-shot measure of the rise in the country’s standing globally. So, what could be wrong in any of the above? Well, it depends on how you perceive the source of the money, how it is put to use and whether it has generated any benefits, as claimed.

India’s FDI sources

Guess the name of the country that has the highest FDI investment in India cumulative for the last 20 years? It is Mauritius. A tiny nation with a population of 12.65 lacs has invested Rs. 795,941 Cr in India in the last 2 decades. Meaning, each citizen of Mauritius has invested Rs. 62.90 lacs in the last 20 years in India.

Singapore comes in at No. 2 position cumulative for the last 20 years. In 2019-20, Singapore invested Rs. 103,615 Cr in India. With its population of 57.03 lacs, each Singapore citizen invested Rs. 1.82 lacs in India in just one year.

Cyprus has a position of merit in the list of FDI sources in India. The country with a population of fewer than 12 lacs is at an 8th position, cumulative last 2 decades. Rounding up the 10th position cumulative last 20 years and 5th position for 2019-20 is the Cayman Islands.

We can have a contest to locate theĀ Cayman Islands on the world atlas but that will not deter the population of 65,813 people to invest Rs. 263,97 Cr in India in the single year of 2019-20. Each citizen invested Rs. 40 lacs in India in a single year from this, I do not know where, country.

From the above profile, we can safely generalize that an island-nation having a population below 1 Cr is a sure-shot FDI generator for us. May global warming increase their tribe swelling the coffers of the Indian Government.

Who needs the large boys when India can raise enough and more FDI from tiny countries? Conversely, when India can raise so much from small nations, wonder how much FDI it can raise from large countries?

This is the largest ever vote of confidence in the India growth story. Three cheers for India.

Tax Havens as FDI sources

Apart from being island-nations, there is another connecting link between the above-mentioned four countries. There is also a fifth country in the Top 10 group – Netherlands. All these five countries are classified as tax havens globally and incidentally, contribute more than 60% of India’s FDI in the last 20 years. Of course, there are more and they also figure in the list of India’s FDI sources at prominent positions.

Cumulative last 20 years, Switzerland is at 12th position; Hong Kong at 14th position, Luxembourg at 15th position, British Virginia at 21st position. Again, all are tax havens.

All these countries are destinations for money laundering, concealing ill-gotten wealth, maintaining secrecy for all the transactions and the entities involved etc. Meaning, all the stuff deemed criminal in a normal country are legal in these countries. Besides, the corporations get the proud tag of working in international finance centres, a euphemism for these tax havens.

A blind eye by the Government

The Government officials and the industry experts, all of them, will term everything above as a slander. They can neither deny the FDI numbers and the source countries nor the fact that they are tax havens. This is where the spin doctors justify their existence.

The Government and the industry, in tandem, slickly and slyly will portray that FDI investment is required for a nation to progress. Moreover, there is no issue with the money that India is getting, the money is clean. The authorities are on the prowl and they will pick up a slightest of scent.

Just that, there will never be an explanation as to why India always seem to be getting money only from tax havens. Nobody, repeat nobody, will ever get a notice for investing money from these countries that actively facilitate tax evasion/round-tripping/financial manipulation etc.

What’s and Where’s the benefit of FDI?

The Government of the day will piously claim that the FDI goes into manufacturing, infrastructure, generating jobs etc. The sectors attracting highest FDI inflows, cumulative last 20 years, show that this is the farthest from the truth.

The biggest sector benefiting is the services, it has got nothing to do with manufacturing. The second sector is computer software & hardware, followed by telecommunications and trading. What is trading doing in the FDI list, that too at 4th number, getting cumulative Rs. 176,005 Cr? What is getting traded with so much of foreign brought money?

The Government should make public the number of industries/manufacturing units/jobs benefited by the FDI inflow. But, that is too much to expect. Else, not the Government authorities, but the public will come to know who is bringing back the black money.

All of the above clearly shows the seriousness of the Narendra Modi Government in getting hold of the black money. The loot and the bringing back of the booty are going on in full view of the Government, it is blissfully content to take its cut and brandish it as an achievement of India growth story.

Long live India, long live the corrupt Indian Government, long live the fraudsters and long live the Cayman Islands.

PS: I felt that the demonetisation was high on the intention with the execution completely botched up by inept Government departments; not anymore.

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