FDI into India from Cayman Islands, Cyprus during April-September falls sharply

Foreign direct investment (FDI) fell sharply from the Cayman Islands and Cyprus to India during the first half of the fiscal year (April-September). FDI from the Cayman Islands decreased 75 per cent to $145 million, while FDI from Cyprus contracted by over 95 per cent to $35 million, according to government data.

Experts attribute this decline to heightened scrutiny of applications. Anjali Malhotra, a Partner in Regulatory at Nangia Andersen India, suggests that the recent decrease in investment from these tax havens may be due to increased scrutiny. 

She notes that FDI from other tax havens, including Singapore and the UAE, has also seen a decline during the first half of the fiscal year. Malhotra links this overall fall in FDI to increased interest rates in the US and other Western nations, driven by high inflation and geopolitical situations in Eastern Europe and West Asia.

Sanjay Kumar, a Partner at Deloitte India, points out that the overall FDI outflow from Cyprus to the world has been declining at a compound annual growth rate (CAGR) of 62 per cent.

Regarding the Cayman Islands, he mentions that the region was removed from the grey list by the Financial Action Task Force (FATF) in October, which could potentially lead to a positive FDI flow from the Cayman Islands in the future.

FDI into India declined by 24 per cent to $20.48 billion in April-September 2023-24, with lower inflows in sectors such as computer hardware and software, telecom, auto, and pharma.

(With PTI Inputs)