India’s offshore pivot: the implications of a tougher approach towards Mauritius

ABSTRACT

A relatively unknown yet significant relationship in the global political economy – Mauritius serving as an offshore financial centre to India – has recently been challenged by the Indian government. This development raises questions about the extent to which the global offshore system has changed. The article presents the argument that India is taking more concerted steps on global taxation reform than most economies, bolstered by a strengthened capital position, a heightened international focus on tax justice and new elites certain that foreign investment will flow directly into India. There are two broader lessons. First, while India’s actions against unfair tax competition are laudable, there are still contradictions, highlighted by Indian multinational offshore usage. Second, other developing countries may be unable or unwilling to follow India’s harder line on the offshore. The larger point to be drawn from this case is that the offshore economy is noticeably weakened but not exhausted.

KEYWORDS:

• Offshore backlash
• India-Mauritius
• Indian exceptionalism
• emerging markets
• tax justice

Disclosure statement

No potential conflict of interest was reported by the author.

Notes on contributor

Justin Robertson is an Associate Professor in the Department of Asian and International Studies at the City University of Hong Kong. He is the author of Localizing Global Finance: The Rise of Western-Style Private Equity in China and US-Asia Economic Relations: A Political Economy of Crisis and the Rise of New Business Actors. He has had articles published in Asian Survey, Globalizations, International Political Sociology, Journal of the Asia Pacific Economy, New Political Economy, The Pacific Review and Review of International Political Economy. His most recent research explores the extent to which hedge funds, private equity funds and offshore structures are materializing in emerging markets.

ORCID

Justin Robertson http://orcid.org/0000-0002-7484-0112

Notes

1 The 1990s are widely acknowledged to have been boom years in the use of Mauritius structures to invest portfolio capital in India and Mauritius’s share was certainly above 27%, but data from the 1990s is unavailable.

2 In the 2015–2018 period, the Netherlands surpassed the United Kingdom to become the fourth largest investor in India. Cyprus and the United Arab Emirates are also jurisdictions with tax and regulatory advantages that place in the top ten. Future research could investigate whether the Netherlands, which has maintained its capital gains exemption for investments in India, holds only a short-term or a more lasting advantage for global deal-making in India. Some Indian groups are concerned that the Netherlands will replace Mauritius as an offshore tax jurisdiction for investing in India (CGBA, 2018).

3 In both 2001 and 2006, the Indian stock market fell over 10% in one day and trading was suspended due to fears over the future of the India-Mauritius relationship. There were also significant drops in 2007, 2010, 2011 and 2012.

4 The comments of one Indian trade minister, Kamal Nath, colourfully capture India’s willingness to challenge the trade diplomacy of Western countries: ‘next time can you bring a picture of an American farmer? I have never actually seen one. I have only seen US conglomerates masquerading as farmers’ (cited in Blustein, 2009, p. 185).

Additional information

Funding

This work was supported by Research Grants Council, University Grants Committee: [Grant Number 9042442].