Singapore has replaced Mauritius as the top source of FDI or foreign direct investment into India during the first half of the current fiscal. During April-September 2015, India has attracted $6.69 billion (₹43,096 crore) FDI from Singapore while from Mauritius, it received $3.66 billion (₹23,490 crore), according to data from the Department of Industrial Policy and Promotion (DIPP). Foreign investment from Singapore has more than doubled from $2.41 billion in the year-ago period.
According to experts, the Double Taxation Avoidance Agreement (DTAA) with Singapore incorporates Limit-of-Benefit (LoB) clause, which has provided comfort to foreign investors based there to invest in India. FDI from Singapore during the first six months of the current financial year is also more than what it had invested in India for the whole of 2013-14 ($5.98 billion).
FDI vs FPI
FDI or Foreign Direct Investment
- It refers to international investment in which the investor obtains a lasting interest in an enterprise in another country.
- FDI is calculated to include all kinds of capital contributions, such as the purchases of stocks, as well as the reinvestment of earnings by a wholly owned company incorporated abroad (subsidiary), and the lending of funds to a foreign subsidiary or branch.
- FDI is more difficult to pull out or sell off. Consequently, direct investors may be more committed to managing their international investments, and less likely to pull out at the first sign of trouble.
FPI or Foreign Portfolio Investment
- It represents passive holdings of securities such as foreign stocks, bonds, or other financial assets, none of which entails active management or control of the securities’ issuer by the investor.
- Unlike FDI, it is very easy to sell off the securities and pull out the foreign portfolio investment. Hence, FPI can be much more volatile than FDI.
- For a country on the rise, FPI can bring about rapid development, helping an emerging economy move quickly to take advantage of economic opportunity, creating many new jobs and significant wealth.