Mauritius: the end game?
- Rahul mocks Modi, says his Gujarat development model is a toffee model
- Under fire over Baru's revelation, Congress retorts by calling 'Vajpayee the weakest PM India ever had'
- Narendra Modi, party not separate, no infighting: BJP on Joshi's remarks
- BJP dancing to the tune of RSS; Lok Sabha elections battle between two completely different ideologies, says Sonia Gandhi
- Elections 2014 Live: BJP workers embarrass Murli Joshi by shouting pro-Modi slogans
Just as India has hit a high current account deficit of 6.7 per cent for the third quarter of the fiscal year, Mauritius which accounts for just a shade less than 40 per cent of foreign investment into India too has hit a 7 per cent current account deficit.
Should this be a cause for worry? The island is tied to the Indian capital markets even before New Delhi began to allow foreign investors a peep into the markets from 1991 onwards. Of course almost none of the money that is funnelled into BSE and NSE from Mauritius originates from Mauritius. But all of it does use the banking system of the island.
In its Article IV consultation with Mauritius conducted in January this year the IMF has noted "The persistently large external current account deficit reflects low savings and could give rise to future vulnerabilities. This should be addressed through policies to promote national savings and foster competitiveness, which will require longer-term adjustments to reduce fiscal deficits".
This is the standard IMF speak. The problem is that as an open but small economy the island's fiscal space is limited. The pressure on domestic savings is coming from the huge spike in real estate market, with even South Africans buying up large chunks on beach fronts. Mauritius is the best real estate story in Africa.
Again the IMF notes "developments in the real estate sector should continue to be monitored carefully, both in terms of price and rental growth and with respect to the impact on the banking sector". So what could a pressure on the banking sector look like for the dollars and reconstituted rupees flowing through it and mainly coming to India? If the deficit stays stubborn and the value of the Mauritius rupee slips, would this translation still remain active just on the basis of the tax concession India gives? The stock of broad money in Port Louis is about 125 per cent of the GDP (India, for instance is less than 80 per cent of the GDP). Comparable figures are those of Iceland before the crisis and Singapore or Macau now.
- Sonia, Rahul must come clean on issues raised in the books:BJP
- Security men at every step, Shinde keeps ‘safe distance’ from voters, debunks charges
- In Beed, Modi factor dents Munde’s goodwill among Muslims
- Ambareesh campaigns for Nilekani
- Raids on Bellary moneylender yield Rs 8.74 crore cash
- MP faces Amreli villagers’ ire in campaign