Amid tax treaty uncertainties, India's share of the number of investments made by global companies through Mauritius has almost halved in the past two years even as Africa's share has surged significantly.
Africa now accounts for over 50 per cent of the total number of investments made through Mauritius, while India's share has fallen to just about 15 per cent.
Negotiations to amend the Indo-Mauritius tax treaty have been hanging fire for many months amid India's apprehensions that the pact is being misused to route unaccounted money and evade taxes.
While Mauritius says it has strict checks and balances in place, uncertainties over the tax treaty have adversely affected investment flows between the two nations.
According to figures compiled by the island nation's Financial Services Commission (FSC), the share in the number of investments made by global business companies into India slumped to 15.87 per cent in 2012.
In 2010, India's share was as high as 32.27 per cent, before declining to 23.25 per cent in 2011. The FSC is the integrated regulator for all non-banking financial services and global business sectors in Mauritius.
The numbers pertain to Global Business Companies (GBCs), entities that are licensed to operate in Mauritius by the FSC.
In comparison to India's share, Africa attracted 50.95 per cent of total number of investments made by GBCs in 2012. This marks a substantial increase from Africa's share of 30.68 per cent in 2010 and 40.12 per cent in 2011.
"A few years back, Mauritius was largely dependent on the Indian market but the African strategy adopted showed positive results," FSC said in its latest annual report for 2012.
"A large part of investment is now directed towards Africa, thus reducing the dependence on India. Such a result reveals not only the market is now diversifying but also that investment has increased," it added.
However, the regulator stressed that India remains an important partner for Mauritius and it has closely followed policy developments such as the Indian General Anti-Avoidance Rule (GAAR) and the Direct Tax Code.
In September, FSC Chief Executive Clairette Ah-Hen had said that some new investors are not exploring investment opportunities offered by Mauritius as a gateway to India due to tax pact-related concerns.
"Because of this uncertainty, both India side and Mauritius side are losing, as we could have otherwise got the momentum. The funds would have been flowing (into India).
"But now you have a situation where investors wait and watch. So they will look for alternatives...That is where time is important (for revising the pact)," Ah-Hen had told PTI in an interview.