Beating Mauritius

FDI surge from Cayman Islands makes it the new Mauritius; chorus grows China might be routing investments into India through it

- DIPAK MONDAL

Cayman Islands is situated in Caribbean Sea, 480 miles southwest of Miami, USA. The three islands are spread over 101 square miles, have a population of 65,000 and gross domestic product (GDP) of $5.5 billion, slightly more than that of the Union Territory of Puducherry.

Still, it was the third-largest contributor of equity foreign direct investment (FDI) in India in the first six months of FY21 ($2 billion). Only Singapore ($8.3 billion) and the US ($7.13 billion) were ahead. The tiny British Overseas Territory even bettered Mauritius, traditionally the biggest source of FDI into India.

The emergence of Cayman Islands as India’s biggest FDI source is not a one-off event triggered by the Covid-19 pandemic. The trend had been taking shape for the last two-three years, but became more visible only in FY20 when the island became the fifth-largest source of FDI ($3.7 billion). It had entered the top 10 (sixth rank) only in FY18. While it topped countries such as France, Germany, the UK and Japan in the last three years, if trends for the current financial year hold, it may outflank Mauritius, traditionally the number one FDI source, in FY21.

Why is a country half the size of Puducherry emerging as one of India’s biggest FDI contributors? Is it the new Mauritius — a typical no-tax, low-compliance jurisdiction, which investors take advantage of to route ill-gotten money into India? Or is there more to it than meets the eye — a China connection, may be?

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