Over US$3 billion flow into India from Mauritius every year. It is the largest provider of foreign direct investment to India. Created as a tax haven and millionaire’s paradise with some of the best resorts and facilities in the world (like the Oberoi’s), Indian investment and managers are reportedly largely responsible for its prosperity.

At the same time, Mauritius is very important to India strategically. India has  a satellites tracking station and base here. We also use Mauritius as a base for getting to Antarctica. It is one of India’s strongest allies and has always supported India’s case for  a permanent seat in the Security Council. Currently Mauritius is receiving over $100 million in aid from India to build a dazzling IT city. India’s spheres of influence are limited but Mauritius is one of them. This is not surprising — over 50% of its people are of Indian origin. However, it has its share of problems.

The French influence here is very strong even as there is a French Naval base at the Reunion Islands and a powerful British American nuclear military presence in Diego Garcia , 1200 miles North. The French influence throughout the neighbouring Africa — Madagascar and other countries  —  is very strong. The strongest military and economic presence south of Mauritius is South Africa’s. Mr K Subramaniam, the well-known defence expert, acknowledges the superpower presence of America as the predominant naval presence here, with the creation of the Fifth Fleet, earmarked for a permanent place in the Indian Ocean. It was created during the cold war to strike deep into southern Soviet Union with a nuclear arsenal. Today it is being used to support its military efforts in Africa, the Gulf, Afghanistan and other parts of Asia.

Mauritius lays peaceful claim to the Chagos Archipelago exemplifying the clash between the developing and developed world. Indian naval ships visit Mauritius often. Mauritian ships visit India for training. Mauritius is the largest and most important of all the Indian Ocean Island littoral States, like the Maldives, Seychelles, Comoros and Reunion, and has very strong relations with India. Indian naval influence here is not as much as it could be. The Indian navy doesn’t seem to look beyond the Andamans as far as bases are concerned, as opposed to the global strategy of America and Britain.

According to Mr Gurjit Singh former joint secretary, Africa Division, the ministry of external affairs, Mauritius is very important for India — and we are reassessing its strategic importance , especially as it is the Indian equivalent of the Bahamas.

Among the top ten investing companies of Mauritius in India are CEPA Investment (US$788.73 million) and AT&T Cellular (US $373 million). India exports $162.16 million worth of goods to Mauritius and imports just $3.26 million worth of goods from it. The Mauritian rupee is linked to the euro, and is stronger than the Indian rupee.

However, Mr Dev Chumroo, the director of the Board of Investment, Mauritius, insists that in the issue of the Double Tax Avoidance Agreement and the case of ITO vs The Union of India in the Supreme Court, the problem is entirely on the Indian side.

This treaty remains the most controversial aspect of relations between the two countries and one wonders why it is not cleared up. Obviously vested interests are high. India has such DTA treaties with other countries like Austria; so does Mauritius. Why has only this one run into so much flak? Given the quantum of investment, India could:

l Continue with the treaty with Mauritius by increasing investment coming in from here, but ensuring that transparency, anti-corruption laws and legalities are adhered to;

l Give it less importance; reduce levels of investment, increasing FDI from other countries and maintaining much stronger checks and transparency;

l Scrap it and scrutinise and change its own laws so that it is possible to generate foreign investment within India so that FDI is not required.

It seems disproportionate to its importance that so much money should be coming into India from a country like Mauritius, causing surprise and instability on either side. The view of Mauritius from India and India from Mauritius are substantially different. We should probably follow a combination of all three options, starting with the first one, going on to the second if that doesn’t work, and ideally, staying with option three.

The safety of Indian investments in Mauritius is always a question mark especially since the distrust of India runs deep among the general population. As a senior Mauritian official protested, “ We are Mauritians, not Indians. I do not like the Indian High Commissioner (who is an important figure) — he should mind his own business. (He is too interfering in our affairs)”.