Are all FDIs real foreign investment?

While the various reforms initiated by the Centre has led to a significant increase in FDI inflows into India, the Economic Survey feels the need for a closer examination of such FDI flows to determine whether there has been any instances of tax evasion.
The survey noted that out of FDI equity inflows of $24.8 billion during 2015-16 (April-November), more than 60 per cent have come from two geographically small countries — Singapore and Mauritius.
“These inflows need perhaps to be examined more closely to determine whet-her they constitute actual investment or are diversions from other sources to avail of tax benefits under the Double Tax Avoidance Agreement (DTAA) that these countries have with India,” the survey added.
DTAA is a tax treaty between two countries to avoid double taxation of the same income in two countries. There are wide variations in the FDI inflows into India from different countries. However, Singapore, Mauritius, Netherlands and the USA account for the major share of such inflows.
Among various sectors, services, construction, computer hardware and software, telecommunication and automobiles have received the highest foreign investment in the last couple of years.
According to the survey, FDI statistics of the last fifteen years reveal that the services sector has accoun-ted for the highest inflows (17.6 per cent of total FDI inflows into India) followed by construction (8.8 per cent), computer hardware and software (7.2 per cent), telecom (6.6 per cent) and the auto (5.2 per cent).
The government has liberalised and simplified FDI norms related to various sectors including defence, construction, broadcasting, civil aviation, plantation, trading, private sector banking, satellite establishment and operation and credit information companies. During 2015-16, FDI policy in the pension sector has been revised to permit foreign investment up to 49 per cent, with 26 per cent under automatic route.