Major trade and finance hubs into India are based in Dubai, Mauritius, Singapore and Sri Lanka.
More than 40% of long-haul journeys from India go via a non-Indian hub, often in the Gulf. Indian airports no longer make grown men cry (Delhi’s is first rate), but few foreign airlines want to make them their base. Indian planes are usually serviced in Dubai, Malaysia and Singapore, reflecting a history of penal taxes in India and high customs duties on imported spare parts.
Indians go to Dubai to avoid taxes at home and because they trust its certification and inspection regime. Dubai’s ports, air links and immigration rules also make it a better logistical base than India.
About 5,000km (3,000 miles) south of Dubai lies Mauritius, an island so beautiful that Mark Twain said God had modelled heaven on it. About half its people are descended from labourers brought from India when Britain ruled both places. It is the main conduit for foreign investment into India with 30-40% of the stock of foreign capital sitting in funds domiciled in the island. A 1982 tax treaty allows investors using Mauritius to pay tax at the island’s rate (which, in practice, is zero), not the Indian rate. Foreigners also like the stability of Mauritius’s rules and its army of book-keepers and administrators. Many investors also use “P-Notes”—a kind of derivative with banks that gives them exposure to Indian shares without having the hassle of directly owning them.
Sri Lanka has testy relations with India, but Colombo is a vital port. About 30% of containers bound for India go via intermediate hubs fed by small vessels, either because big shipping lines do not want to deal with India’s customs regime or because their ships are too big for the country’s ports. About half of this trans-shipment business happens in Colombo. Its importance could increase now that a big extension to the port there has just opened. The project was funded by a Chinese firm probably too polite to admit that its investment is partly based on the idea that India’s ports will never be world-class.
The largest hub for Indian trade is probably Singapore. It is the centre for investment banking, which thrives offshore, owing to the tight regulation of India’s banks and debt markets. Reflecting this, the global exposure to India of Citigroup and Standard Chartered, the two foreign banks busiest in India, is 1.9 times the size of their regulated Indian bank subsidiaries.
Fund managers running money in India are often based in Singapore.
Manufacturing, Industry and mining drifting offshore
The biggest worry is that heavy industry is getting itchy feet. Coal India, a state-owned mining monopoly sitting on some of the world’s biggest reserves, plans to spend billions of dollars buying mines abroad—red tape and political squabbles mean it is too difficult to expand production at home.
Some fear manufacturing is drifting offshore