Ratings agency Standard and Poor's (S&P) has recently cut India's outlook to
negative from stable and issued a threat of potential downgrade, citing high
fiscal deficit. As a result, Indian government is facing tremendous pressure to
reduce its fiscal deficit. In order to
increase revenues for the government, India is planning to review the
double-taxation avoidance agreement (DTAA) with Mauritius. The reason behind
the review is to prevent misuse of the treaty and track illicit money allegedly
stashed in the African island nation. The country was losing more than USD $600
m every year in revenue because of the tax treaty, besides incurring the risk of
militant groups using it to route money into India. This announcement had sent a
panic wave in the Indian stock markets. It must be noted that Mauritius has the
biggest share (39%) of foreign direct investment (FDI) inflows in India.
Data source: Ministry of Commerce and
Industry *April 2000 to February 2012 |
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