FDI

Singapore’s investment in India

Singapore was the ninth largest investor in India in 2003-04 and has now climbed up to number 7. According to the Secretariat for Industrial Assistance, Ministry of Commerce & Industry of India, cumulative FDI from Singapore (approved) from September 1995 to September 2005 adds up to US$ 893.07 million.

In 2004, approved FDI from the city-state stood at US$ 136.3 million. Of this 45.5% materialized with actual flow amounting to USD 62.1 million. Such investments have grown by an astounding 60 per cent annually for the last 10 years. This has further increased to around US$ 184 million in 2004-05.

The top 5 sectors attracting FDI from Singapore in India include Telecommunications (17.93%), services (financial & non-financial) (16.28%); electrical equipments (including computer software & electronics) (12.4%), fuel (power & oil refinery) (11.12%), and transportation industries (8.85%).

India is expecting a 300 per cent increase in its foreign direct investment from Singapore in the first year of the implementation of the Comprehensive Economic Cooperation Agreement (CECA), cleared by the Union Cabinet in June 2005. According to Commerce and Industry Minister Kamal Nath, FDI inflows from Singapore may be expected to touch US$ 2 billion while Foreign Institutional Investment was expected to increase to US$ 5 billion in the first year. The CECA became operational from August 1, 2005.

Singapore’s investments in India are likely to have been understated so far, as many overseas investments into India were routed through Mauritius to take advantage of the favourable DTA between the India and Mauritius. For example Singtel made an US$ 1.07 billion investment in India through a Mauritius entity in 2000, for a stake in Bharti Televentures and a joint venture with Bharti Enterprise for an undersea cable linking India and Singapore. It may be noted here that the total value of FDI received in India through Mauritius is US$ 9 billion.

India's Double Taxation Avoidance Agreement (DTAA) with Singapore is now modeled more on the lines of the existing treaty with Mauritius, with exemption for capital gains tax on profits from sale of shares built into the agreement. Singapore will probably turn out to be India's Hong Kong and there could be a shift in FDI from Mauritius to Singapore.

Indian investment in Singapore
As per the Investment and Trade Promotion Division of the Ministry of External Affairs, Singapore was the eleventh most important destination for outward FDI from India in 2004. Total Indian investment in Singapore up to 2004 added up to US$ 203.261 million.