A great deal of Foreign Direct Investment (FDI) to India comes from Mauritius than from many major and mature economies like UK and France. Why?

The primary reason is tax and treaty advantages: the India–Mauritius Double Taxation Avoidance Agreement (DTAA) historically exempted capital gains and made Mauritius a low-tax conduit, producing large recorded FDI from Mauritius into India and facilitating ‘round‑tripping’ of Indian funds as foreign investment [1]. Round‑tripping and use of shell/intermediate entities through Mauritius to obtain treaty benefits and lower taxes are well documented explanations for the outsized Mauritius share of India’s FDI [2]. India amended the treaty in 2016 to curb capital‑gains exemptions and treaty‑shopping, confirming the DTAA’s central role in the phenomenon. The other options (general Indian preference, ethnic ties, or climate change motives) are not supported by evidence and are implausible as primary causes.

Sources

1. [1] Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 5: Indian Tax Structure and Public Finance > Double Taxation Avoidance Agreement (DTAA) > p. 119
2. [2] Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 16: Terminology > 16 Terminology > p. 460