Foreign direct investment inflows into the country dropped by around $500-600 million during the first nine months of the current financial year as investments from Mauritius dropped by as much as $1 billion due to the legal imbroglio over ownership of investments from the island nation.

The loss was, however, made up to some extent by a slight increase in FDI from the US and some other countries, a senior government official told Business Standard on Monday.

Cash crisis

Investment inflows from Mauritius have been under government scrutiny for doubts over the beneficial owners The loss was made up to some extent by a slight increase in FDI from the US and some other countries

In the process, the share of FDI from Mauritius in the total inflows into the country came come down from around 17 per cent to close to 12 per cent.

In 2002, FDI from Mauritius stood at Rs 1,846.6 crore (Rs 18.47 billion). In the first nine months of this year, investments from the island nation have dropped to around Rs 470 crore (Rs 4.7 billion).

Sources in the government said as per the new definition of FDI, the inflows in the first nine months of last year stood at $3.5 billion compared with a figure of around $3 billion in the corresponding period this year.

"One of the reasons for a decline in FDI inflows is the high investment by the FIIs in the stock market. However, we expect inflows to spiral in the next few months," he said.

The investment inflows from Mauritius have been under government scrutiny for doubts over the beneficial owners.

There have been apprehensions that a substantial part of the investment from Mauritius was using participatory notes to invest in the stock market.