India Announces USD680 mn Special Economic Package for Mauritius

Syllabus: GS2/IR

Context

• India announced a USD 680 million Special Economic Package for Mauritius during the visit of Mauritius Prime Minister Navinchandra Ramgoolam to Varanasi in 2025, aimed at deepening strategic and development cooperation between the two countries.

Key Points

• Under the special economic package, India will assist Mauritius in implementing at least 10 projects, including upgrading key infrastructure such as ports, airports, and roads, as well as establishing new schools and hospitals.
• Approximately USD 440 million (grant-cum-Line of Credit) will be used for large infrastructure projects such as completion of a new Air Traffic Control (ATC) tower at SSR International Airport and development of Motorway M4.
• The both sides will work towards enabling bilateral trade in local currencies following successful launch of UPI and RuPay cards in Mauritius.
• The package reflects strong people-to-people ties, with over 68% of Mauritius’s population being of Indian origin, strengthening bilateral goodwill.
• Joint redevelopment and restructuring of the Port Louis port to make Mauritius a stronger regional maritime hub.

India-Mauritius Bilateral Relations

• Diplomatic Relations: India and Mauritius established diplomatic relations in 1948 and have become key trading partners in the Asian continent.
• Commercial Relations: For the FY 2022-2023, Indian exports to Mauritius was USD 462.69 mn, Mauritian exports to India was USD 91.50 mn and Total trade was USD 554.19 mn.
  • Double Taxation Avoidance Agreement: Signed in 1982 to help non-resident investors avoid double taxes.
  • CECPA Agreement: India and Mauritius signed the Comprehensive Economic Cooperation and Partnership Agreement (CECPA) in 2021, India’s first trade agreement with an African country.
  • FDI Source: Mauritius is the second-largest source of Foreign Direct Investment (FDI) into India for FY 2023-24, after Singapore.
• Defence Relations: India is Mauritius’ preferred defence partner for acquiring platforms, capacity building, joint patrolling, hydrological services, etc.
  • First Agreement: Transfer of a Dornier aircraft and an Advanced Light Helicopter (Dhruv) to Mauritius on lease.
  • Second Agreement: A $100 million Line of Credit (LoC) for Mauritius to procure defence equipment.
• Space Cooperation: India and Mauritius are exploring space research opportunities and signed an MoU in 2023 for developing a joint satellite.
• Indian Migration: French Rule (1700s): Indians from Puducherry were brought to Mauritius as artisans and masons.
  • British Rule (1834 – early 1900s): About half a million Indian indentured workers arrived in Mauritius. The majority of these workers settled in Mauritius, influencing its culture and demographics.
• Development Partnership: India has been contributing to projects like the Metro Express, new hospitals, and infrastructure in Agaléga Island.
• Humanitarian Assistance: India assisted Mauritius during Cyclone Chido in 2023, showcasing India’s role as a “First Responder.”
• SAGAR: The term SAGAR  – ‘Security and Growth for All in the Region’  was coined by the PM in 2015 during his visit with a focus on the blue economy. 

Significance of Mauritius for India: 

• Strategic Location: Mauritius is strategically located in the Indian Ocean, crucial for India’s maritime security and trade routes.
• Agaléga island: It is located 1,100 km north of Mauritius, has strategic importance due to its proximity to the Indian southern coast. 
  • In 2024, India and Mauritius jointly inaugurated the air strip and jetty projects on the island, strengthening their bilateral cooperation.
• Countering China’s Influence: Strengthening ties with Mauritius is crucial for India to counter China’s growing presence in the Indian Ocean region.
• Geopolitical Competition: The Indian Ocean region is a hotspot for geopolitical rivalry, with countries like Europe, the Gulf, Russia, Iran, and Turkey expanding their influence.
• Cultural and Historical Ties: With nearly 70% of its population of Indian origin, Mauritius shares deep cultural, historical, and familial ties with India.
• Blue Economy: Mauritius is key to India’s interests in the Indian Ocean’s blue economy, especially for maritime resources, fisheries, and offshore energy exploration.
• Indian Ocean Cooperation: Mauritius plays a key role in regional organizations like the Indian Ocean Rim Association (IORA), contributing to regional stability and economic cooperation.

Areas of Concern:

• Tax Treaty Misuse: The Double Taxation Avoidance Agreement (DTAA) between India and Mauritius had been a point of concern due to its potential misuse for illicit activities like money laundering and round-tripping of funds.
• Security Concerns: Mauritius is a key maritime entity in the Indo-Pacific, making security issues critical.
  • India and Mauritius have a strong defence partnership, but evolving regional dynamics pose challenges to maintaining and enhancing this relationship.
• Presence of China: In 2021, China’s Free Trade Agreement (FTA) with Mauritius came into effect.
  • This agreement will help China expand the Belt and Road strategy in Africa.
  • China’s increasing presence in the region will pose concerns for India.

Way Ahead

• The relationship between India and Mauritius is multifaceted and has grown stronger over the years. 
• Both nations can work towards expanding defense and security collaboration, including joint training, counterterrorism efforts, and maritime security.
• This multi-faceted approach can further solidify the longstanding relationship between India and Mauritius, contributing to mutual growth and regional stability.

About Mauritius – Location: Mauritius, island country in the Indian Ocean, located off the eastern coast of Africa. 1. Mauritius lies about 500 miles (800 km) east of Madagascar in the Indian Ocean. – Population: Nearly 70% of the population (1.2 million) is of Indian origin, strengthening ties with India. – Colonial History: Mauritius was initially a French colony before becoming a British possession. – National Day: Mauritius celebrates National Day on March 12, in honor of the date of Mahatma Gandhi’s Dandi March.

Source: TOI