India has been attracting significant foreign investment over the years, with various countries looking to tap into its booming economy and vast market potential. Among these nations, one country stands out as the top investor in India – Mauritius. Despite its small size and distance from the Indian subcontinent, Mauritius has emerged as a significant source of foreign direct investment (FDI) in India. In 2021-22, FDI inflows from Mauritius stood at around $ 9.39 billion.

The strong bond between India and Mauritius is rooted in historical, demographic, and cultural factors. With over 70 percent of the 1.2 million people living on the island being of Indian descent, there is a shared heritage that strengthens the relationship. The sustained high-level political contact between the two countries further reinforces mutual trust and understanding. This deep connection has facilitated exceptional cooperation in various domains, including maritime security, development partnerships, capacity building, international engagement, and technical assistance.

Trade between India and Mauritius has also played a significant role in strengthening their economic ties. The Comprehensive Economic Cooperation and Partnership Agreement (CECPA), signed in 2021, marked India's first trade agreement with an African country. This agreement further solidified the bilateral relationship and paved the way for increased trade between the two nations. In the fiscal year 2021-2022, the total trade between India and Mauritius amounted to $ 786.72 million, with significant growth witnessed over the past 15 years. 

India has emerged as Mauritius's largest trading partner, taking on the role of the primary exporter of goods and services to the island nation in the Indian Ocean since 2007. This close relationship presents an opportunity for India to play a pivotal role in fostering Mauritius's growth as a regional hub for innovation. India's commitment to the development of the Indian Ocean region aligns with Mauritius's aspirations to position itself as a regional economic powerhouse.

The Double Tax Avoidance Agreement (DTAA) between India and Mauritius has played a significant role in attracting investment from Mauritius to India. Between 2001 and 2011, Mauritius contributed approximately 39.6 per cent of FDI inflows into India. However, concerns regarding the misuse of the treaty and round-tripping of funds led to amendments in 2016 and the implementation of the General Anti-Avoidance Rule (GAAR) in 2017. The 2016 amendment allowed for the imposition of capital gains tax on investments originating from Mauritius from 2017 and the GAAR resolved a prolonged dispute concerning the Mauritius treaty. These measures demonstrate India's commitment to streamlining taxation, reducing complexity, and gradually eliminating tax exemptions. By enhancing the taxation framework, India aims to create a fair and conducive environment for foreign investors while promoting economic growth and investment in the country.

As India focuses on its strategic engagement with the Indo-Pacific region, Mauritius holds a crucial position as a valued partner, offering unique opportunities for collaboration and mutual growth. India's vision for the Indo-Pacific, envisioned in SAGAR (Security and Growth for All in the Region), emphasizes the need to strengthen economic and security cooperation with its maritime neighbors. Mauritius, as a member of the African Union, the Indian Ocean Rim Association (IORA), and the Indian Ocean Commission, serves as a crucial gateway to various geographies. 

By leveraging its economic ties and strategic partnerships, India can contribute to Mauritius's development as a vibrant center for innovation and entrepreneurship. The collaboration between the two countries can lead to the exchange of knowledge, technology, and expertise, driving economic growth and attracting investments in sectors such as information technology, finance, renewable energy, and tourism.