In­dia-Mau­ri­tius to restart FTA talks soon

Agree­ment of strate­gic im­por­tance to counter Chi­nese pres­ence in the In­dian Ocean

Business Standard - - ECONOMY - DILASHA SETH

In­dia andMau­ri­tius are set to re­vive talks for a free trade agree­ment (FTA), fol­low­ing a re­vi­sion of the bi­lat­eral tax treaty last year that gave In­dia the right to im­pose the cap­i­tal gains tax on in­vest­ments routed through the is­land na­tion.

More than eco­nomic sig­nif­i­cance, the trade talks are of strate­gic im­por­tance to strengthen New Delhi’s pres­ence in the In­dian Ocean re­gion to counter China’s mega in­vest­ment plans through its one-belt-one-road (OBOR) ini­tia­tive.

“Eco­nom­i­cally, we do not see much ben­e­fit as it is a small coun­try with a pop­u­la­tion of a mil­lion peo­ple. What can they pro­duce and what can they sup­ply to us? Sim­i­larly, what can we sup­ply to them?” a govern­ment of­fi­cial said, adding that the FTA, called the Com­pre­hen­sive Eco­nomic Co­op­er­a­tion and Part­ner­ship Agree­ment, was more of a friendly ges­ture.

Nev­er­the­less, In­dian ne­go­tia­tors are go­ing to pitch for the fa­cil­i­ta­tion of ser­vices trade in the pact, with a fo­cus on tourism, ho­tel in­dus­try and fi­nan­cial ser­vices. The of­fi­cial-level talks started last week, and the next round of dis­cus­sions will be in Port Louis by the end of Novem­ber.

Mau­ri­tius is a ma­jor sugar pro­ducer, man­u­fac­tur­ing 4,00,000 tonnes of sugar per an­num. Be­sides, it has a sig­nif­i­cant marine econ­omy.

In­dia’s ex­ports to Mau­ri­tius grew 3 per cent in 2016-17 and made up 0.3 per cent of its over­all out­bound ship­ments at $881 mil­lion. Im­ports from Mau­ri­tius were in­signif­i­cant at $18.4 mil­lion in 2016-17, ac­count­ing for 0.0048 per cent of In­dia’s to­tal pur­chases. How­ever, Mau­ri­tius is the sin­gle largest source of for­eign di­rect in­vest­ment (FDI) to In­dia. FDI in­flows from Mau­ri­tius to In­dia stood at $15.7 bil­lion in 2016-17, mak­ing up 34 per cent of to­tal FDI in­flows to In­dia. The FDI flow may have slowed af­ter the amend­ment of the dou­ble tax­a­tion avoid­ance treaty in April.

An­other of­fi­cial added that New Delhi may give more to Mau­ri­tius in tar­iff re­duc­tion. “With Mau­ri­tius we will be a lit­tle lib­eral,” he said.

For In­dia, the pact will be of geopo­lit­i­cal and strate­gic sig­nif­i­cance to im­prove its pres­ence in the In­dian Ocean in view of China’s ag­gres­sive push in the re­gion.

“One has to keep in mind that China

In­dia and Mau­ri­tius are set to re­vive talks for a FTA af­ter four years

Move an ef­fort to strengthen Delhi’s pres­ence in In­dian Ocean re­gion to counter China’s OBOR ini­tia­tive

In­dian ne­go­tia­tors to pitch for fa­cil­i­ta­tion of ser­vices, with a fo­cus is in­flu­enc­ing Mau­ri­tius and other coun­tries in the re­gion to a large ex­tent by ex­tend­ing lines of cred­its and other in­vest­ment in­stru­ments. In­dia should also eco­nom­i­cally strengthen its in­ter­est,” said Ajay Sa­hai of the Fed­er­a­tion of In­dian Ex­ports Or­gan­i­sa­tion.

He added that as for eco­nomic part­ner­ship, there could be prod­ucts sup­plied by In­dia to Mau­ri­tius, since it had on tourism and fi­nan­cial ser­vices

Of­fi­cial talks started last week; next round to be held in Port Louis by Novem­ber-end

FTA talks were sus­pended ear­lier to build pres­sure on Mau­ri­tius to ex­pe­dite dou­ble-tax­a­tion avoid­ance deal a huge tourism sec­tor. “Right now, prod­ucts in Mau­ri­tius mainly come from Dubai. In­dia could look at that space. Be­sides, in ser­vices, we could look at joint ven­tures in tourism and ad­ven­ture tourism,” Sa­hai said.

In­dia ex­tended a line of credit worth $500 mil­lion to fi­nance civil­ian in­fra­struc­ture projects in Mau­ri­tius. New Delhi is also sup­port­ing the Na­tional Coast Guard ofMau­ri­tius in en­hanc­ing its ca­pac­ity. China is plan­ning to in­vest bil­lions of dol­lar to build in­fra­struc­ture, in­clud­ing ports, rail­ways, power grids, etc, across Asia, Africa and Europe through the In­dian Ocean as part of its OBOR project.

Biswajit Dhar, pro­fes­sor, Jawa­har­lal Nehru Univer­sity, said that a con­ven­tional FTA with Mau­ri­tius did not make sense. “There is no sense of do­ing an FTA, un­less there is a po­lit­i­cal and strate­gic di­men­sion to it. It is part of a larger strat­egy to counter the grow­ing in­volve­ment of China in the re­gion,” he said.

The FTA talks between In­dia and Mau­ri­tius were sus­pended four years ago by New Delhi to build pres­sure on the lat­ter to ex­pe­dite the dou­ble tax­a­tion avoid­ance agree­ment. Ear­lier, tax evaders used to ex­ploit loop­holes in the tax treaty with Mau­ri­tius be­ing a zero-tax na­tion, en­sur­ing com­plete tax avoid­ance. Af­ter the amend­ment, In­dia has got the right to tax cap­i­tal gains on shares from April on­wards. Firms rout­ing funds into In­dia through Mau­ri­tius now have to pay short-term cap­i­tal gains tax at 7.5 per cent dur­ing a twoyear tran­si­tion pe­riod be­gin­ning April 2017, af­ter which a full rate of 15 per cent will be im­posed.

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