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India Special Report T.P. Seetharam : Mauritius has remained the largest source of FDI for India for more than a decade
India is celebrating its 62nd year as a Republic. It is one of the countries with which Mauritius has had blood relationship for nearly two and a half centuries. At the beginning of the 21st century relations between the two countries have taken a new turn with strengthened economic ties and shared concern with what is happening in the Indian Ocean and in the world economy. The High Commissioner of India in Mauritius, T.P Seetharam gives us a true picture of the current situation in this part of the world with Mauritius as the main focus. How would you gauge bilateral relationship between Mauritius and India? It is known that the level of trade and commercial deficit is highly in favour of India. Now there is fear of import of onions and fuel from India. How can your Government dissipate such fears among the local population here? India and Mauritius share a unique and extraordinary bilateral relationship given the nature of our shared history and culture. These ties are further strengthned by our shared and unflinching commitment to democratic and pluralistic ideals. Our political ties remain close and cordial. The April 2011 State Visit of President Smt. Pratibha Devisingh Patil was a landmark opportunity for both sides to take stock of bilateral relations and impart momentum and renewed impetus to our friendly, dynamic and comprehensive bilateral partnership. Regular mutual ministerial visits reinforce cooperation in specific sectors as witnessed during the recent visit of the Minister for New and Renewable Energy Dr. Farooq Abdullah. India and Mauritius have signed bilateral agreements in a panoply of sectors encompassing trade and investment, ICT, renewable energy, hydrography, capacity building, and cultural cooperation. Economic and commercial ties are on a steady upward trajectory. India has become Mauritius largest source of imports since 2007 and our official figures indicate that Mauritius imported US$ 816 million worth of goods in the April 2010-March 2011 financial year. Mauritius has remained the largest source of FDI for India for more than a decade with FDI equity inflows totalling US$ 55.2 billion in the period April 2000- April 2011. There are many Indian companies present in Mauritius in various sectors. I feel there is a great deal of potential for Indian businesses to partner with their Mauritian counterparts in several sectors like infrastructure, tourism and hospitality, health, education, ICT, renewable energy, food security, agro-processing... A large component of the trade between India and Mauritius is constituted by Mauritius imports

of all its petroleum requirements from India. While we feel there is need to diversify our bilateral trade and investment portfolio, we are glad that this agreement between MRPL and STC has performed well for several years and has lent a certain stability of supply and price to Mauritius petroleum requirements. I do not perceive any fear in the Mauritian population in this regard given the unique, privileged and longstanding nature of our dynamic and comprehensive bilateral ties. I also strongly feel that food security, which is an important issue for Mauritius since you apparently import around 70% of your food requirements, is another area which holds promise for bilateral cooperation. Some Mauritian and Indian companies are already collaborating in this regard in Mozambique.

India and Mauritius also cooperate in combating piracy which has emerged as a major threat in the Indian Ocean region. An Indian Naval Ship, INS Savitri is currently berthed in Port Louis to undertake EEZ surveillance, joint patrolling and training of Mauritian security personnel in this regard as part of our joint endeavours. ITEC and IAFS capacity building and training programmes continue to be in great demand among Mauritian officials and experts. Over 100 scholarships are offered every year to Mauritian students to pursue higher education in India in various streams like science, arts, engineering, architecture, medicine, fine arts, and languages. Our cultural cooperation remains vibrant. The IGCIC has emerged as a top-notch institution promoting cultural friendship between the two countries. The World Hindi Secretariat (WHS), a bilateral venture of the Governments of India and Mauritius, had recently organised the World Hindi Day to promote and popularise the languages vibrancy, history and ability to bring people together. I must thank the Government of Mauritius for its consistent support to Indias stand against terrorism in all its manifestations. We are also grateful for your support to our legitimate claim for a permanent seat in an expanded UNSC. Mauritius being the seat of the IOR-ARC has been very supportive and encouraging of the associations endeavours and ideals. We hope that during Indias chairmanship, IOR-ARC will be revitalised and contribute to tackling the challenges faced by the countries of the Indian Ocean region. What was the reaction of the Indian Government when Sir Anerood Jugnauth, during his visit last year, confirmed the support of Mauritius to India for a seat at the UN Security Council? India is very grateful for Mauritius unswerving support for Indias candidature for a permanent seat in an expanded UNSC. This has been reaffirmed in all high-level bilateral interactions for several years including recently during the State Visit of President Smt. Pratibha Patil in April 2011 and also in Prime Minister Navinchandra Ramgoolams UNGA speech in September 2011. We are certainly grateful to President Sir Anerood Jugnauths reaffirmation of Mauritius support for Indias rightful claim. The Indian Diaspora and particularly Mauritians of Indian descent have not yet fully grasped the privileges offered to them by the Indian Government? Could you elaborate on the latest decisions taken on this matter? Prime Minister Dr. Manmohan Singh announced at the 10th PBD Convention recently held in

Jaipur that in the last session of Indias Parliament the Government introduced a Bill intended to merge and streamline the People of Indian Origin and Overseas Citizens of India schemes by amending the Citizenship Act. This will rectify some of the anomalies in the schemes and provide for an Overseas Indian Card which will be given to foreign spouses of such card holders as well. What can the 10th PBD bring forward to consolidate relationships between India and Mauritius? The 10th edition of the Pravasi Bharatiya Divas Convention which brings together the Indian Diaspora which is spread over 110 countries and numbers over 27 million was held in Jaipur from January 7-9, 2012. The theme of this years PBD-2012 was Global Indian-Inclusive Growth. Mauritius has always sent large delegations to PBD Conventions and this time, a delegation 115 strong led by Minister of Arts and Culture Mookhesswur Choonee was present. Former Prime Minister Sir Anerood Jugnauth (2003), former Vice President Raouf Bundhun (2006), Prime Minister Navin Ramgoolam (2008) and former Vice President late Angidi Chettiar (2009) have been Pravasi Bharatiya Samman awardees. It is an opportunity for Indian diaspora from all over the world, including Mauritius to reaffirm their strong and emotive cultural roots. It is also an opportunity for them to network in the areas of trade and investment. The PBD is also a platform for the Indian Diaspora to engage the Government of India and communicate some of their issues, concerns and interests which are then looked into. PBD 2012 also saw pre-conference seminars/sessions on: Solar EnergyInvestment and Social Entrepreneurship-Water - January 7, 2012. There were also sessions on gender, culture, connectivity and youth issues. Indias economic growth has attracted the attention of worlds leading nations like China, Russia and the USA, with the official visit of the Heads of State of these countries in New Delhi last year. What are the main results of these visits and how could India benefit from these high-level consultations. India has longstanding ties of cooperation with all the countries you have mentioned. The Government of India regards the visits of all Heads of State/Heads of Government, including those of P-5 countries in the latter part of 2010, as a matter of great honour and as part of a process of growing global recognition of Indias expanding political, economic, scientific, technological, societal, cultural and security-related engagements with the world. Our bilateral partnerships with the US, Russia, China, UK and France and indeed with Germany, Japan, Africa and ASEAN and other countries are result-oriented. There are strong business, scientific, technology and cultural elements in all these relationships. India also seeks to address domestic developmental challenges through collaborative ventures with these countries which have a bearing on the co-prosperity and stability of an interconnected globe. Discussions with these countries include within their ambit, the articulation of positions, interests and concern on issues of regional and global significance. Let me add that our bilateral relations with the US, Russia, China and several other countries have transcended the bilateral dimension and have acquired global and strategic significance. It is our desire to use our strategic bilateral

relationships with these countries to further peace, stability and prosperity in the world. Do you think that rising inflation could affect the economic growth of India and bring down its image as a strong emerging nation? In the last 3-4 years, we have seen an unprecedented level of panic, uncertainty and turmoil in the global economy and the world of finance. No country has been able to render itself completely immune to the ripples and shocks arising from the sub-prime mortgage crisis of 2008 and the ongoing Eurozone debt cauldron. The net result has been that while countries in the developed West have shown very sluggish economic growth or even decline and low demand, countries in Asia have had to fend off rising inflation especially in the food and fuel sectors. Due to rising inflation, the RBI adopted a policy of monetary tightening over the last one-and-ahalf years which impacted on GDP growth. Indias GDP growth projections for the financial year 2011-12 were revised from an expected 8% or more, to around 7-7.5% - still reasonable given the global economic climate. However, in the last one month, official reports and data have been promising. In fact, December 2011 data shows that inflation has fallen sharply from near double-digit levels to a two-year low of 7.47%. The Indian economy is largely driven by domestic demand and these recent trends portend a return to the trajectory of long-term robust growth for the Indian economy. How far can India reconcile its image as a country of non-violence while at the same time getting involved in increasing development of nuclear power? The credo of non-violence is an integral and vital constituent of the civilisational ethos of India. Indias long and eventful history is full of examples of individuals and mass movements that relied on this concept to awaken the masses; be it the Mahavira, the Buddha, Emperor Ashoka, the Bhakti and Sufi movements, the Indian independence movement led by Mahatma Gandhi and so on. As a rapidly developing and modernising young nation, India faces unique challenges in the 21st century. The addressing of these challenges requires massive amounts of energy. As an energy deficit country, nuclear energy provides a critical option to enlarge our energy basket. Indias ambitious nuclear energy programme expects to generate up to 20,000 MW of energy by 2020 and up to 63,000MW by 2032. Our long-term objective is to generate nearly 25% of our energy needs through nuclear power by 2050. India remains firmly committed to universal, non-discriminatory nuclear disarmament. Minimum credible deterrence is being maintained in view of threats and challenges and Indias clear, consistent and publicly stated doctrine articulates a no first-use policy. Initiatives for Overseas Indians The Overseas Indian Citizenship (OCI) Scheme was formerly launched in January 2006 by amending the Citizenship Act, 1955 to facilitate lifelong visa free travel to India and certain economic education educational and cultural benefits to Persons of Indian Origin (PIOs). As on 30th June 2011, a total number of 861,726 PIOs have been registered as OCIs.

Voting Rights To NRIs The Representation of Peoples Amendment Act 2010 has been passed which gives voting rights to overseas Indian passport holders. Overseas Workers Resource Centre To educate the intending emigrants about the risks involved in irregular migration and the precautions to be taken while seeking overseas employment, an Overseas Workers Resource Centre (OWRC) a toll free 24x7 helpline has been set up. The helpline provides information within India at 100 11 1900. The helpline can also be reached from anywhere in the world at 9111-40503090. Indian Council Of Overseas Employment Indian Council of Overseas Employment is initiating a number of projects in collaboration with IOM. One such mega project is skill development initiative for potential migrants from the North-East States of India. Indian Community Welfare Fund Indian Community Welfare Fund which was originally for all ICE countries has been extended to 48 countries. Since this scheme is found to be very useful by the Indian Missions in mitigating the suffering of Overseas Indian community, particularly workers and women, it has been decided to extend this fund to all the Missions around the world. Overseas Indian Facilitation Centre The OIFC, an institution established by the Ministry of Overseas Indian Affairs has compiled Homeward Bound a regulatory & investment handbook for Overseas Indians, which was released by the Prime Minister of India, during the 9th Pravasi Bharatiya Divas, held from 7th to 9th January, 2011 in New Delhi. This document would further facilitate Overseas Indians economic engagements with India.

INVESTMENT FOREIGN DIRECT INVESTMENT http://www.indiainbusiness.nic.in/investment/for_dir_investment.htm The role of Foreign Direct Investment (FDI) in the upgradation of technology, skills and managerial capabilities is now well accepted. Additional investments, over and above the investments possible with the available domestic resources, help in providing much needed employment opportunities. The 2012 A.T. Kearney Foreign Direct Investment Confidence Index has ranked India second most attractive destination for FDI , an improvement from its third rank in the year 2010. Foreign Direct Investment (FDI) inflows for the year 2012-13 Under the extant Foreign Direct Investment (FDI) policy, FDI upto 100 percent is allowed under the automatic route in most sectors/activities, except a few, where sectoral equity/entry route restrictions have

been retained. FDI, under the automatic route, does not require any approval and only involves intimation to the Reserve Bank of India within 30 days of inward remittances and/or issue of shares to non-residents. Amount of FDI inflows for the Financial year 2012-13 (for the month of August 2012) was US$ 2.26 billion .Amount of FDI equity inflows for the financial year 2012-13 (from April 2012 to August 2012) stood at US$ 8.17 billion.Cumulative amount of FDI (from April 2000 to August 2012) into India stood at US$ 179.02 billion. Sector-wise distribution of FDI inflows During August 2012, top 10 Sectors attracting highest FDI inflows were Services Sector (19 per cent), Construction development: Townships,housing, built-up infrastructure* (12 per cent), Telecommunications (7 per cent), Computer Software & Hardware (6 per cent), Drugs & Pharmaceuticals (5 per cent),Chemicals (other than Fertilizers) (5 per cent), Power (4 per cent), Automobile Industry (4 per cent), Metallurgical Industries (4 per cent), Petroleum & natural gas (3 per cent) . *In line with the extant FDI policy, the Sectors "Housing and Real Estates" & "Construction Activities" have been renamed as construction development: Townships, housing, built-up infrastructure and construction development projects and construction (Infrastructure) activities, respectively.

Country-wise distribution of FDI inflows Top 10 investing countries during August 2012 were Mauritius (37 per cent), Singapore (10 per cent),U.K (10 per cent),Japan (7 per cent),U.S.A (6 per cent),Netherlands (4 per cent), Cyprus (4 per cent), Germany (3 per cent), France (2 per cent), U.A.E (1 per cent) . Foreign Direct Investment Policy India's foreign investment policy has been formulated with a view to inviting and encouraging FDI into India. The process of regulation and approval has been substantially liberalised. FDI under automatic route is permitted in most activities/sectors, except a few where prior approval of the Government is required. Government of India welcomes FDI in all sectors where it is permitted, especially for development of infrastructure, technological upgradation of Indian industry through 'greenfield' investments and in projects having the potential of creating employment opportunities on a large scale. Investment for setting up Special Economic Zones (SEZs) and establishing manufacturing units are also welcomed. Entry Routes for Investment Procedure under Automatic Route FDI in sectors/activities permitted under automatic route does not require any prior approval either by the Government or RBI. The investors are only required to notify the Regional office concerned of RBI within 30 days of receipt of inward remittances and file the required documents with that office within 30 days of

issue of shares to foreign investors. Procedure under Government Approval FDI in activities not covered under the automatic route require prior Government approval. Such proposals are considered by the Foreign Investment Promotion Board (FIPB), a Government body that offers single window clearance for proposals on foreign investment in the country that are not allowed access through the automatic route. Government approval is required in the following cases:

Where a foreign investor has an existing joint venture/technology transfer / trademark agreement in the same field, prior to January 12, 2005, the proposal for fresh investment / technology transfer / collaboration / trademark agreement in a new joint venture would have to be under the Government approval route through FIPB. In sectors with caps, including inter-alia defence production, air transport services, ground handling services, asset reconstruction companies, private sector banking, broadcasting, commodity exchanges, credit information companies, insurance, print media, telecommunications and satellites, Government approval / FIPB approval would be required in all cases where: o An Indian company is being established with foreign investment and is owned or controlled by a non-resident entity or o The control or ownership of an existing Indian company, currently owned or controlled by resident Indian citizens and Indian companies, which are owned or controlled by resident Indian citizens, is being transferred to a non-resident entity as a consequence of transfer of shares and/or fresh issue of shares.

These guidelines do not apply for sectors/activities where there are no foreign investment caps, that is, 100% foreign investment is permitted under the automatic route. Investment by way of Share Acquisition A foreign investing company is entitled to acquire the shares of an Indian company without obtaining any prior permission of the FIPB subject to prescribed parameters/ guidelines.If the acquisition of shares directly or indirectly results in the acquisition of a company listed on the stock exchange, it would require the approval of the Security Exchange Board of India. New investment by an existing collaborator in India A foreign investor with an existing venture or collaboration (technical and financial) with an Indian partner in particular field proposes to invest in another area, such type of additional investment is subject to a prior approval from the FIPB, wherein both the parties are required to participate to demonstrate that the new venture does not prejudice the old one. General Permission of RBI under FEMA Indian companies having foreign investment approval through FIPB route do not require any further

clearance from RBI for receiving inward remittance and issue of shares to the foreign investors.The companies are required to notify the concerned Regional office of the RBI of receipt of inward remittances within 30 days of such receipt and within 30 days of issue of shares to the foreign investors or NRIs. Participation by International Financial Institutions Equity participation by international financial institutions such as ADB, IFC, CDC, DEG, etc., in domestic companies is permitted through automatic route, subject to SEBI/RBI regulations and sector specific cap on FDI. Applications for all FDI cases, except Non-Resident Indian (NRI) investments, Export Oriented Units (EOUs) and for FDI in retail trading (single branded product) should be submitted to the FIPB Unit, Department of Economic Affairs (DEA), Ministry of Finance. The procedure for filing FDI applications has been simplified through e-filing facility launched by the DEA. For e-filing, please see FIPB website at www.fipbindia.com . Applications for NRI investment, EOU and for FDI in single-brand retail trading should be submitted to Secretariat for Industrial Assistance (SIA) in Department of Industrial Policy & Promotion (DIPP). Sectors Prohibited for Foreign Direct Investment FDI is prohibited in only the following activities: (a) Retail Trading (except single brand product retailing) (b) Atomic Energy (c) Lottery Business including Government /private lottery, online lotteries,etc. (d)Gambling and Betting including casinos etc. (e)Business of chit fund (f) Nidhi company (g)Trading in Transferable Development Rights (TDRs) (h)Real Estate Business or Construction of Farm Houses (i) Activities/sectors not opened to private sector investment (j) Manufacturing of Cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes.

TRADE Indias Trade and Commercial Relation Indias total merchandise trade increased from US$ 621 billion in Fiscal year 2011 to US$ 794 billion in Fiscal year 2012. Indias exports during 2011-12 amounted to US$ 304.6 billion, as compared to US$ 251.1 billion during 2010-11. In the current year i.e 2012-13, exports during September, 2012 were valued at US$ 23698.30

million which was 10.78 per cent lower in Dollar terms than the level of US$ 26561.20 million during September, 2011. Cumulative value of exports for the period April-September 2012 -13 was US$ 143675.66 million as against US$ 154148.82 million registering a negative growth of 6.79 per cent in Dollar terms over the same period last year. Indias imports during 2011-12 amounted to US$ 489.4 billion, as compared to US$ 369.8 billion during 2010-11. Overall, trade deficit for 2011-12 amounted to US$ 184.7 billion, as compared to US$ 118.6 billion during 2010-11.In the year 2012-13,imports during September, 2012 were valued at US$ 41778.68 million representing a growth of 5.09 per cent in Dollar terms over the level of imports valued at US$ 39756.07 million in September, 2011. Cumulative value of imports for the period April-September, 2012-13 was US$ 232927.13 million as against US$ 243546.21 million registering a negative growth of 4.36 per cent in Dollar terms over the same period last year. Indias Major Trading Partners Top Export Markets for the Fiscal year 2012 Figures in US$ billion 1 2 3 4 5 6 7 8 9 10 UAE USA China Singapore Hong Kong Netherlands UK Germany Belgium Indonesia 36 34 18 17 13 9 9 8 7 7 304.6

Indias Total Exports Source: EXIM Bank Top Import Sources for the Fiscal year 2012

Figures in US$ billion 1 2 3 China UAE Switzerland 58 36 32

4 5 6 7 8 9

Saudi Arabia USA Iraq Kuwait Germany Australia

31 23 19 16 16 15 15 489.4

10 Indonesia Indias Total Imports Source: EXIM Bank Indias Trade Basket Top Export Items for the Fiscal year 2012

Figures in US$ billion 1 2 3 4 5 6 7 8 9 Petroleum Products Gems & Jewellery Pharma Products Transport Equipments Machinery & Instruments Readymade Garments Manufactures of Metals Electronic Goods Rubber, Glass & Products 56 47 24 21 14 14 10 9 7 7

10 Cotton Yarn & Fabrics Source: EXIM Bank Top Import Items for the Fiscal year 2012

Figures in US$ billion 1 2 3 Petroleum Crude Gold & Silver Electronic Goods 155 62 33

4 5 6 7 8 9 10

Pearls & Precious Stones Non-electrical Machinary Organic & Inorganic Chemicals Coal, Coke & Briquettes Transport Equipment Metalliferrous Ores & Products Iron & Steel

31 30 19 17 14 13 12

Source: EXIM Bank Indias Direct Investment Flows Foreign direct investment inflows into India for the Financial year 2012-13 (for the month of July, 2012) was US$ 1.47 billion. Amount of FDI equity inflows for the financial year 2012-13 (from April 2012 to July 2012) stood at US$ 5.90 billion.Cumulative amount of FDI (from April 2000 to July 2012) into India stood at US$ 176.76 billion. Top 10 Investing Countries FDI Equity Inflows for the year 2012-13 (April-July) Ranks Country 2012-13 ( April - July) (figures in US$ million) 1,970 886 421 417 179 616 245 276 68 83 5,902 %age to total Inflows (in terms of US$) 37 10 10 7 6 4 4 3 2 1 -

1 2 3 4 5 6 7 8 9 10

Mauritius Singapore U.K. Japan U.S.A. Netherlands Cyprus Germany France U.A.E.

Total FDI Inflows Source: DIPP

Top 10 Sectors Attracting Highest FDI Equity Inflows for the year 2012-13 (April-June) Ranks Country 2012-13 ( April - July) (figures in US$ million) 1,649 421 15 112 478 74 237 234 334 103 %age to total Inflows (in terms of US$) 19 12 7 6 5 5 4 4 4 3

1 2 3 4 5 6 7 8 9 10

Services Sector (Financial & Non-Financial) Construction Development: Townships, Housing, Built-Up Infrastructure # Telecommunications (Radio Paging, Cellular Mobile, Basic Telephone Services) Computer Software & Hardware Drugs & Pharmaceuticals Chemicals (other than fertilizers) Power Automobile ndustry Metallurgical Industries Petroleum & Natural Gas

# In line with the extant FDI policy, the Sectors "Housing and Real Estates" & "Construction Activities" have been renamed as construction development: Townships, housing, built-up infrastructure and construction development projects and construction (Infrastructure) activities, respectively. Source: DIPP Indias Foreign Exchange Reserves Foreign exchange reserves are an essential element in the analysis of an economy's external position. India's foreign exchange reserves comprise foreign currency assets (FCAs), gold, special drawing right (SDRs) and reserve tranche position (RTP) in the International Monetary Fund (IMF). Foreign exchange reserves are accumulated when there is absorption of the excess foreign exchange flows by the RBI through intervention in the foreign exchange market, aid receipts, interest receipts, and funding from institutions such as the International Bank for Reconstruction and Development (IBRD), Asian Development Bank (ADB) and International Development Association (IDA). The twin objectives of safety and liquidity are the guiding principles of foreign exchange reserves management in India, with return optimization being embedded strategy within this framework. During the year 2011-12, foreign exchange reserves stood at US$ 294.39 billion as compared to US$ 304.82

billion in the year 2010-11. In the current fiscal 2012-13, the reserves were recorded at US$ 290.46 billion in August 2012-13 as compared to US$ 321.98 billion in August 2011-12. Indias Forex Reserves for the year 2012-13

Figures in US$ billion 2010-11 2011-12 2012-13 Months April May June July August 2010-11 279.63 273.54 275.71 284.18 283.14 2011-12 313.51 311.52 315.71 319.09 321.98 2012-13 294.85 286.02 289.74 288.78 290.46 304.82 294.39

Source: Reserve Bank of India (RBI)

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