While
the various reforms initiated by the Centre has led to a significant
increase in FDI inflows into India, the Economic Survey feels the need
for a closer examination of such FDI flows to determine whether there
has been any instances of tax evasion.
The
survey noted that out of FDI equity inflows of $24.8 billion during
2015-16 (April-November), more than 60 per cent have come from two
geographically small countries — Singap-ore and Mauritius.
“These
inflows need perhaps to be examined more closely to determine whet-her
they constitute actual investment or are diversions from other sources
to avail of tax benefits under the Double Tax Avoidance Agreement (DTAA)
that these countries have with India,” the survey added.
DTAA
is a tax treaty between two countries to avoid double taxation of the
same income in two countries. There are wide variations in the FDI
inflows into India from different countries. However, Singapore,
Mauritius, Netherlands and the USA account for the major share of such
inflows.
Among
various sectors, services, construction, computer hardware and
software, telecommunication and automobiles have received the highest
foreign investment in the last couple of years.
According
to the survey, FDI statistics of the last fifteen years reveal that the
services sector has accoun-ted for the highest inflows (17.6 per cent
of total FDI inflows into India) followed by construction (8.8 per
cent), computer hardware and software (7.2 per cent), telecom (6.6 per
cent) and the auto (5.2 per cent).
The
government has liberalised and simplified FDI norms related to various
sectors including defence, construction, broadcasting, civil aviation,
plantation, trading, private sector banking, satellite establishment and
operation and credit information companies. During 2015-16, FDI policy
in the pension sector has been revised to permit foreign investment up
to 49 per cent, with 26 per cent under automatic rout
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