Singapore second largest source of FPI inflows in Indian equity markets, in October

7 Nov 2022 , 08:55 AM

According to the most recent data from depositories, Singapore has surpassed Mauritius to grab the second-largest share of foreign portfolio investment (FPI) inflows into India.

In comparison to Mauritius-based offshore funds, which owned securities worth Rs4.69 lakh crore as of October 31, Singapore-based offshore funds held securities worth Rs4.89 lakh crore.

The United States of America, which as of October 1 held stocks valued at Rs20.1 lakh crore, is the greatest source of FPI inflows.

India revised its tax agreements with Singapore and Mauritius back in 2016. At the time, Mauritius-based FPIs held assets valued at Rs4.3 lakh crore, about twice as much as Singapore’s Rs2.4 lakh crore.

Singapore has been gaining an edge over its competitors ever since. After Singapore introduced the variable capital company (VCC) scheme for the investment management industry in 2021, this process escalated.

Companies have been allowed to freely redeem shares and pay dividends using their assets under the VCC scheme, although this is not allowed for conventional funds. Additionally, VCCs are not required to make any data public. The plan also established a simpler regulatory framework for funds willing to redomicile in Singapore.

Singapore has a particularly strong presence in the debt fund market. The island country owns debt documents worth Rs1.1 lakh crore in India, which is double the amount owned by Mauritius, accounting for close to one-third of all loan inflows into India.

Market participants claimed that Mauritius, which has been losing appeal as an investment destination over the past few years, has suffered as a result of Singapore’s ascent. A key warning sign for foreign businesses, Mauritius was added to the Financial Action Task Force’s (FATF) grey list in 2020.

Following 2017, India enrolled in the Organization for Cooperation and Development (OECDBase )’s Erosion and Profit Sharing (BEPS) programme. With the help of this programme, significant tax loopholes around the world that have been abused by big multinational corporations will be closed.

All tax arbitrage avenues have been eliminated in India through BEPS and other bilateral agreements. India has also enacted anti-avoidance regulations that forbid funds and businesses from choosing a foreign country only for tax benefits.

Due to this increased security, multinational corporations and funds have begun to select nations that are well-liked by international regulators. Singapore benefited greatly from this development as it is the Asia Pacific region’s centre for fund management.

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